How Can NRIs Lower TDS on Income Generated from India?

Non-resident Indians (NRIs) frequently experience difficulties in managing taxes in India. TDS is a common source of anxiety for NRIs because it requires deducting a set proportion of revenue at the source. This article deals with how can NRIs avoid TDS on income generated from India, TDS on NRI property, and TDS exemption for NRI property, How to lower TDS on NRI income.

Contents

Understanding TDS for NRIs

TDS (Tax Deducted at Source) is applied to a wide range of income for NRIs, including TDS on interest paid to NRIs, salary, rent, capital gains, and so on. For most income kinds, the general TDS rate for NRIs is 30%, unless a lower rate is stipulated by the Double Taxation Avoidance Agreement (DTAA) between India and the place of residence. Understanding how can NRIs avoid TDS should be an important asset for NRIs, advocates, and others.

Methods to Avoid TDS

• Submitting Form 15G/15H: NRIs can submit Form 15G/15H to the payer to declare that their total income is below the taxable limit and, hence, not subject to TDS. Form 15G is for individuals below 60 years of age, while Form 15H is for senior citizens (age 60 and above). However, NRIs are only eligible to submit Form 15H if they meet certain conditions, such as having no tax liability in the relevant financial year.

• Applying for a Lower TDS Certificate: NRIs can apply to the Assessing Officer (AO) of the Income Tax department for a certificate for lower TDS deduction. This application can be made if the NRI estimates that their total income for the financial year, after taking into consideration deductions and exemptions, will be below the taxable limit. If the AO approves the application, a certificate will be issued with a specific lower TDS rate, which the payer must then follow.

• Tax Residency Certificate (TRC): Obtaining a Tax Residency Certificate from the country of residence is crucial for NRIs seeking relief from TDS. The TRC helps in determining the individual’s residential status in the country of residence and is recognized as substantial evidence for availing benefits under the DTAA. By furnishing the TRC, they can take advantage of the lower TDS rates as mentioned in the DTAA.

• Utilizing the DTAA: DTAA between India and other countries aims to prevent double taxation and provide relief in areas such as withholding tax rates. NRIs should check the provisions of the DTAA between India and the country of their residence to determine if they are eligible for lower TDS rates. By taking advantage of DTAA provisions, NRIs can save taxes in both India and their country of residence.

• Structuring Income: NRIs can also consider restructuring their income to minimize the impact of TDS. For instance, they can receive income as long-term capital gains, which are typically taxed at a lower rate compared to other income types. By choosing the right investment options, NRIs can effectively reduce their tax liability in India.

Also, read: Concept of TDS and TDS Rate Chart for FY 2022-2023

Winding Up Note

Understanding how can NRIs avoid TDS acknowledge the readers that NRIs can utilize various methods to avoid or lower the TDS on their income generated from India. By carefully planning their finances, obtaining necessary certificates, and understanding the provisions of the Double Taxation Avoidance Agreement, NRIs can significantly reduce their tax burden. NRIs must consult with tax professionals or seek expert advice to ensure compliance with tax regulations and to make the most of available options to minimize TDS.

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