For NRIs, dividend earnings is taxed at 20%

For refund of TDS on share dividends, is there any clarification that NRIs can undergo the involved firm, just like the Form 15G that we undergo our banks, to keep away from the deduction of TDS on curiosity earned on a hard and fast deposit? This is for a person who’s underneath the taxation restrict of ₹2.5 lakh.

—Name withheld on request

Effective monetary yr 2020-21 and onwards, any dividend earnings from shares of an Indian firm is taxable in India. In case of a shareholder qualifying as a ‘non-resident’ in India underneath the Income Tax Act, dividend earnings is taxable at 20% plus relevant surcharge and 4% well being & training cess (most marginal fee of 28.5% i.e. 20% earnings tax + 37% surcharge relevant if earnings exceeds ₹5 crore) on gross foundation. In case of ‘non-resident’ shareholders, the slab advantage of ₹2.5 lakh just isn’t obtainable for dividend earnings. In case of a shareholder qualifying as a ‘resident’ in India underneath the Income Tax Act, dividend earnings is taxable at relevant slab charges. The types for non-deduction of tax at supply on dividend earnings may be submitted by resident shareholders solely.

However, underneath the Double Taxation Avoidance Agreement (DTAA) between India and the related host nation, such dividend could also be taxable at a particular fee of tax. To apply for the useful fee underneath DTAA, you’ll need to qualify as a ‘resident’ of the host nation underneath the DTAA and procure a tax residency certificates from the host nation tax authorities and furnish together with Form 10F to the Indian dividend paying firm.

In case of a ‘non-resident’ shareholder, the Indian firm will withhold tax on dividend earnings both (a) at 20% plus relevant surcharge and 4% well being & training cess or (b) at a fee underneath the DTAA. You might want to inform the Indian firm if you happen to intend to assert useful fee underneath the DTAA between India and the host nation and furnish the mandatory declarations.

Thus, in your case, as a ‘non-resident’, the complete dividend earnings can be taxable at 20% plus relevant surcharge and well being & training cess. In case you propose to assert a useful fee underneath the DTAA, you’ll need to acquire a tax residency certificates from the host nation tax authorities, full the Form 10F and supply the mandatory declarations to the Indian dividend paying firm.

Sonu Iyer is tax companion and other people advisory providers chief, EY India.

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