Why NRO TDS on interest income is 30%?

Taxation
1

I found that for NRO savings accounts 30% tds is levied on interest income …but normal resident account this interest is taxed as per applicable tax rate. For savings account there is no TDS at all. Why NRO pay such tax i.e. 30% on interest income? Just because their currency is stronger than Indian Rupee ? what I am missing here ?

Also for short term capital gains - TDS is deducted for NRI @15% and lTCG is tds @10% but for domestic/resident account - no tds is deducted correct? Resident account are supposed to pay quarterly advanced tax instead correct?

@Quicko @TAXIQ.IN

2

@San78 Can you.

3

Primary reason is to ensure that the taxes from NRIs are collected from earliest point of time; so that there is no difficulty in collection of tax subsequently at the time of regular filing.
Earlier, it used to get difficult for tracing them and asking them to pay taxes in India on Incomes accrued and received in India.
Further, it was resulting in loss of revenue to the department as NRIs may sometimes have no assets in India from which tax could be collected.

Hence, all the payments/(incomes) to NRIs/Non Residents subject to a few are done with TDS Deduction.

Maximum slab rate is 30% - Hence 31.2%(including cess) TDS is deducted. If surcharge is applicable, including the component of surcharge will be deducted.

STCG where STT is paid and LTCG are taxed @ 15% and 10% - hence 15% and 10% are deducted.

1 Like
4

Ok thanks…why NRI are taxed at maximum slab rate of 30% ? is it like they are charged at max and than they can get refund depending on their total income (tax slab) at the end of the year?

or its just flat 30% tds without any possibility of refund?

5

Yes, you can file ITR to claim the refund. These articles and videos explain about this -

6

They are charged @ 30% and they can get refund upon filing of income tax return.

7

Hey @curiousvi

Below-mentioned is tha rate at which TDS is deducted as per the provision of Income Tax Act:

  1. Interest earned on the Non Resident Ordinary Account (NRO) is taxable and will be subject to a TDS of 30%
  2. Short term capital gains, that is, profits on sale within one year of date of purchase, will be subject to a TDS of 15%

Yes, in case of resident, TDS is not deducted. At the same time you can claim the refund of excess tax deducted at time of filing ITR.

Hope this helps!

1 Like
8

Just confirming they are charged at 30% but actual tax payment would be as per their tax slab correct? do they have any deduction like domestic Indians have?

9

So apart from TDS for all Savings +FD accounts as well as STCG and LTCG - what else is different between NRI taxes vs domestic taxes?
It seems like Govt wants to charge max TDS from NRI but those NRI will have same tax rate as domestic Indians so …if they have paid excess via TDS - than they can get refund. NRI don’t end up paying more taxes than domestic Indians correct?

I read somewhere NRI can not claim deductions like residents Indians …can you please share which deductions NRI can not claim but resident Indians can?
@San78 @AkshayAtur