How is dividend revenue for NRIs taxed?

How is dividend revenue from shares taxed for non-resident Indians (NRIs)?

—Name withheld on request

Effective monetary 12 months 2020-21, any dividend revenue from shares of an Indian firm is taxable in India. In case of a shareholder qualifying as ‘non-resident’ in India underneath the Indian Income-tax regulation, dividend revenue is taxable at 20% plus relevant surcharge and 4% well being and schooling cess on gross foundation. Thus, the relevant tax price on dividend revenue for a non-resident ranges between 20.8% and 28.5%, relying upon the extent of complete revenue and relevant surcharge.

In case of a shareholder qualifying as a “resident” in India, dividend revenue is taxable on the relevant slab charges.

Benefit underneath the Double Taxation Avoidance Agreement (DTAA) between India and the opposite nation could also be explored to keep away from double taxation or get a decrease price of tax. The Indian firm will withhold tax on dividend both (a) at 20% plus relevant surcharge and 4% well being and schooling cess or (b) at a price underneath DTAA, whichever is decrease. For software of decrease DTAA price, the non-resident shareholder has to furnish tax residency certificates of the opposite nation to ascertain entitlement to say DTAA profit.

My son is staying overseas. His Public Provident Fund account matured in April 2022 and the proceeds have been credited to his Non-Resident Ordinary (NRO) account. How a lot cash will be transferred to him this monetary 12 months?

—Name withheld on request

Under the trade management regulation, the funds will be transferred exterior India from the NRO account topic to an general restrict of $1 million per monetary 12 months (April-March) topic to documentation as requested by the financial institution. 

Sonu Iyer is tax accomplice and other people advisory companies chief, EY India.

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