NRI TDS Simplified: Expert Advice to Save You Time and Money

Priyanka (name changed) redeemed an equity mutual fund in Toronto last year and budgeted for a 15% short-term tax hit, the number she remembered from an article she’d bookmarked years ago. The actual TDS came out at 20%. Not a bank error. The rate had changed in July 2024, and nothing in her bookmarked article, or the dozen similar ones she’d skimmed since, had caught up.

TDS content for NRIs goes stale faster than almost any other financial topic, because Budget 2024 rewrote the capital gains framework in a single stroke. Numbers that were correct in June 2024 are simply wrong today, and they’re still circulating everywhere.

Must Read – How Can NRI Save Tax?

Why TDS Hits NRIs Harder Than Residents

Section 195 of the Income Tax Act governs TDS on payments to non-residents, and it is structurally less forgiving than the resident regime. There’s no minimum threshold before TDS applies, no Form 15G or 15H option to declare income below the taxable limit and skip withholding, that relief exists only for residents. Every rupee gets withheld at source, and getting back what you didn’t actually owe means filing a return.

Property Sale: The Rates Most Content Still Gets Wrong

The flat 20% long-term figure that still appears in older content stopped applying to transfers on or after 23 July 2024. If you’re comparing quotes or reading advice that cites 20% flat, check the date it was written. To reduce the TDS to your actual liability rather than the default rate on the full price, file Form 13 with the Income Tax Department for a lower or nil deduction certificate before the sale deed is signed, not after.

Interest Income: One Number, Not Two Tiers

Interest on an NRO account, whether savings or fixed deposit, is taxable, and the baseline TDS is 31.2%, comprising 30% tax plus 4% cess. Surcharge is added on top only once your total income crosses the relevant threshold under the income tax slabs, it is not a separate flat jump to a higher percentage simply because one deposit exceeds Rs 10 lakh. NRE and FCNR interest, by contrast, is fully exempt, no TDS at all.

Detailed Post – NRI Mutual Fund Taxation in India

Dividends

Dividends have been taxable in the hands of the recipient since the 2020 Budget removed the earlier dividend distribution tax structure. For NRIs, TDS runs at 20% plus applicable surcharge and cess, though a lower treaty rate may apply where DTAA is claimed properly.

Capital Gains on Mutual Funds and Shares: The Numbers That Actually Changed

For unlisted shares or non-equity assets outside the mutual fund categories above, long-term gains are taxed at 12.5% for listed instruments and, depending on the asset, 10% or 20% for unlisted ones, this is genuinely asset-specific and worth confirming per instrument rather than assuming a single universal rate.

Must Read – NRI taxes India

Life Insurance and Pension Products

Payments to NRI policyholders under life insurance, annuity, pension or health insurance products are subject to TDS, unless the specific policy qualifies for exemption under Section 10(10D). To apply a treaty rate instead of the default, submit a Tax Residency Certificate and Form 10F to the insurer. Without these, the maximum default rate of 30% plus surcharge and cess applies regardless of what your actual treaty entitlement would have been.

Read – Tax for NRI on Indian Income

Rent, Professional Fees and Other Payments

Unlike resident-to-resident rent, where TDS only kicks in above Rs 50,000 a month, there is no minimum threshold when the landlord is an NRI. Every rupee is subject to withholding regardless of amount. A 4% cess applies across the board, and a surcharge kicks in once total income crosses Rs 50 lakh.

Why the 15% and 20% Numbers Both Feel Right

Priyanka wasn’t sloppy. She’s a project manager who reads carefully. The mistake was information staleness blindness, treating a saved article as a permanent reference rather than a snapshot from a specific date. A tax rate that was correct when she bookmarked it in 2023 felt exactly as reliable in 2026, because nothing about the article itself signalled that it had expired. The date it was written and the date she read it looked identical to her, even though 18 months and one major Budget separated them.

Tax content doesn’t announce when it’s gone stale. It just sits there, looking exactly as confident as the day it was published.

Getting Excess TDS Back

File your return on time, ITR-2 covers most salary and interest income, ITR-3 if you have business or professional income, ITR-4 in specific presumptive-income scenarios with its own exclusions for higher income and foreign assets. Refunds typically process within 3 to 6 months and land directly in your bank account, with interest at roughly 6% per annum where applicable. Alternatively, or in addition, DTAA relief, via exemption, deduction, or tax credit method depending on the treaty, reduces what gets withheld in the first place if the paperwork, TRC and Form 10F, is filed before the payment, not claimed after.

Check – How to File Return Online

Frequently Asked Questions

Is TDS on equity mutual fund short-term gains really 20%?
Yes, since 23 July 2024. Before that date it was 15%. Content citing 15% for current transactions is out of date.

Can NRIs use Form 15G or 15H to avoid TDS on NRO interest?
No. These forms are only available to resident Indians. NRIs cannot avoid TDS this way, regardless of total income.

Are debt mutual funds still eligible for a long-term capital gains rate?
No. Since the Finance Act 2023, debt fund gains are taxed entirely at your slab rate, with no distinction between short and long holding periods.

Is property TDS really deducted on the sale price, not the gain?
Yes, by default. A Form 13 lower deduction certificate, filed before the sale deed, restricts TDS to your actual tax liability instead of the full consideration.

How do I know if a TDS rate I’m reading online is current?
Check whether the source explicitly references the July 2024 Budget changes for capital gains rates. If a source doesn’t mention that pivot date at all, treat its rates with caution and verify separately.

A bookmarked article does not update itself. The tax rate inside it stopped moving the day you saved it, the law did not.

Before you trust a number, check the date it was born.