Dividend earned by NRIs is taxable in India

My son runs a enterprise overseas and lives there. He has a non-resident Indian (NRI) account and invests in mounted deposits (FDs) in banks and equities of Indian firms. What taxation guidelines will apply to him? What quantity of annual revenue is beneath the taxation restrict? How will the dividend he will get annually be taxed? Is there any exemption restrict on the taxable curiosity earned on financial institution FDs?

—Name withheld on request

It is assumed that your son has non-resident exterior (NRE) and non-resident unusual (NRO) financial institution accounts (financial savings and glued deposits) in India. Any curiosity earned from an NRO checking account will probably be taxable in India. But, in case your son is a ‘resident’ of the opposite nation and the tax residency certificates is offered from the revenue tax authorities of the opposite nation, the curiosity revenue could also be topic to a decrease tax price as per provisions of the double taxation avoidance settlement between India and the opposite nation.

Alternatively, a deduction beneath Section 80TTA could also be accessible as much as ₹10,000 on the curiosity earned from financial savings financial institution accounts. Interest revenue from NRE accounts (financial savings and glued deposits) is exempt from tax in India, supplied your son qualifies as a “particular person resident outdoors India” beneath the alternate management legislation.

Effective FY21 and onwards, any dividend revenue from shares of an Indian firm is taxable in India. If a shareholder qualifies as a ‘non-resident’ in India beneath the India revenue tax legislation, the dividend revenue is taxable at 20% plus relevant surcharge and 4% well being and schooling cess on gross foundation. The relevant tax price on dividend revenue for a non-resident ranges between 20.8% and 28.5% relying on the extent of whole revenue and relevant surcharge. Thus, the dividend revenue earned by your son in India will probably be taxable in India at 20% plus relevant surcharge and 4% well being and schooling cess on gross foundation.

Any revenue arising from the sale of shares listed in a acknowledged inventory alternate in India will probably be taxable as capital beneficial properties. As dividend revenue and capital beneficial properties are taxed at particular charges, the brink exemption of ₹2.5 lakh is just not accessible for non-residents on such incomes. However, curiosity revenue from FDs and financial savings financial institution accounts (after claiming a deduction as much as ₹10,000 on the curiosity revenue from financial savings financial institution accounts) will probably be taxable provided that it exceeds the brink exemption of ₹2.5 lakh.

Sonu Iyer is tax accomplice and folks advisory providers chief, EY India.

Subscribe to Mint Newsletters * Enter a sound e-mail * Thank you for subscribing to our publication.

Never miss a narrative! Stay linked and knowledgeable with Mint.
Download
our App Now!!