An individual who is paying any amount to a Non-Resident Indian (NRI) should be aware that the payment shall be subject to TDS. As per section 195 of the Income-tax Act, 1961, any ‘person’, responsible for paying to a non-resident shall, at the time of making payment (accrued or payable), either via cash or by the issue of a cheque or draft or by any other mode, shall deduct tax from the amount paid at the rates in force as mentioned in Section 2(37A) for the respective financial year. This means that every rupee earned by an NRI in India is subject to TDS at the income tax slab rates applicable to their income.
Even though section 195 mandates deduction of tax at source (TDS) compulsorily, there is an option provided to the payer of the income as well as payee, i.e., the NRI to make an application to the Assessing Officer (AO) for lower or nil TDS on the income.
An NRI can make an application in Form 13 for deduction of income tax at lower rates or nil deduction on income received in India. If the AO is satisfied that the total income of the payee justifies the deduction of income tax at lower rates or no deduction of income tax, the AO shall give the NRI lower/nil TDS certificate as appropriate for this purpose.
Here is a step-by-step guide on how NRI (payee) can apply for lower or NIL TDS certificate
NRIs must keep the following documents and information handy before filing application for lower or nil TDS certificate.
Form 13-Checklist of documents/information
A Digital Signature Certificate (DSC) or E-Verification (through Internet Banking) or Mobile OTP is required for submission of the duly filled in form. If DSC is not registered at TRACES payee has to register his DSC (in case of NRI services)
Jurisdictional AO will be decided on the basis of State & District provided by the applicant in original application of Form-13 and same will be applicable for future as well.
Estimated income computation for the FY certified by Self/Authorized person for which certificate is sought.
Details of income claimed to be exempt and not included in the total income.
Estimated income for any of the 4 previous financial years preceding to the current financial year certified by Self /Authorized person in case return has not been filed.
Assessment Orders if assessed, for the last 4 assessment years.
- If ITR for any of the 4 previous financial year has been filed in Paper Form, if any
Once the required information and documents are collected, the NRI can follow the steps below to apply for lower or nil TDS certificate.
Step 1: Login to TRACES website http://www.tdscpc.gov.in with your User ID i.e., NRI’s PAN, Password.
Step 2: Go to “Statement/Forms” tab and click on Request for Form 13 to initiate the request
Step 3: Form 13 will open on your screen. NRI will be required to fill the following details in the online form:
Particulars of NRI’s income and other relevant details such as status (individual/company/ Hindu undivided family etc), residential status, PAN or Aadhaar, Email ID, Mobile number
Details of existing tax liability under the Income tax Act and the Wealth-tax Act, 1957
Financial year to which the payments/receipts relate
- Estimated total income of the financial year (there is a requirement to upload computation of estimated total income of the previous year)
- Total tax including penal interest payable for the total income referred above
- Details of income claimed to be exempt and not included in the total income (there is a requirement to upload a note giving reason for claiming such exemption)
- Details of payment of advance-tax and tax deducted/collected, if any, for the current year till date
- Whether any exemption under section 10, section 11 or section 12 is claimed. If Yes, then there is a requirement to upload registration/exemption certificate/approval, if any, issued by the Income-tax Authority
- Upload a computation of estimated total income of the previous financial year for which ITR has not been filed (for any of the 4 years preceding the current financial year for which the application is made)
- Where ITR for any of the 4 previous financial years has been filed in paper form, then it is required that a copy of the ITR be uploaded
- Annexures providing particulars in respect of the income/sum for which TDS certificate is sought such as details of TAN or PAN or Aadhaar Number of the payer, section under which tax at source is to be deducted, estimated amount of income/sum to be received, requested rate of deduction (fill ‘0’ where ‘nil’ deduction is requested)
After the request is raised, if the assessing officer needs any further information or clarification, he would reach out to the payer or payee and once satisfied, accordingly issue the certificate. The said certificate can be downloaded from the TDS TRACES portal under the “Download tab”. The lower/nil TDS Certificate shall be issued by AO within one month from the end of the month in which application is received.
Lower or nil TDS certificate application by payer
If the payer of the income such as bank, individual etc. is of the view that the whole/part of the payment would not be an income chargeable to tax in the hands of the payee, he may make an application in Form 15E to the AO. The AO will determine the appropriate proportion of such sum (the payment amount) chargeable to tax. Upon such determination by the AO, tax shall be deducted by the payer only on that proportion of the sum which is chargeable to tax, else no tax will be deducted on income (if no income is chargeable to tax)
