Income Tax on Dividend for NRI

[Mihir Modak]

what is the tax rate on dividend earned by NRI? whether they get basic exemption against dividend income?

 

[SACHIN GARG]

Slab Rate as applicable to individuals will be applicable. Yes, they get basis exemption (threshold limit) against dividend as well.

[Krishanth Sam]

For an NRI, dividend income received from shares of Indian companies is generally taxable in India.

Tax Rate on Dividend Income for NRIs

• Dividend income is typically taxed at 20% TDS under Section 195 of the Income Tax Act.

• However, if the NRI is a resident of a country that has a Double Taxation Avoidance Agreement (DTAA) with India, a lower tax rate may be available subject to submission of the required documents (Tax Residency Certificate, Form 10F, etc.).

Can NRIs Claim the Basic Exemption Limit Against Dividend Income?
Yes, in certain cases. If the dividend income is taxable at normal slab rates and the NRI's total income (after eligible deductions) is below the basic exemption limit, the benefit may be available. However, the applicability depends on the nature of income and specific provisions under the Income Tax Act.

Also, even if TDS has been deducted at a higher rate, the NRI can file an Income Tax Return (ITR) in India and claim a refund of excess tax, if eligible.

Since the tax treatment may vary based on the NRI's country of residence, DTAA benefits, and other sources of income, it is advisable to seek professional tax advice before filing the return.

For expert assistance with NRI taxation, DTAA benefits, and Income Tax Return filing.

AI Summary

Dividend taxation for NRIs allows TDS, DTAA-based relief, and possible basic exemption benefit in suitable cases. Dividend income received by a non-resident Indian from shares of Indian companies is generally taxable in India. Tax is commonly deducted at source at 20% under section 195, though a lower rate may apply where DTAA benefits are available and the prescribed documents are furnished. The basic exemption limit may be available in appropriate cases where the dividend is taxed at normal slab rates and total income remains below the threshold limit.