Non-Resident Indians (NRIs) investing in Indian stock markets need to be aware of the tax implications on capital gains. Both short-term and long-term gains are taxable, and compliance with the Income Tax Department’s rules is essential.
1. Short-Term Capital Gains (STCG)
Applicable when equity shares or equity-oriented mutual funds are sold within 12 months of purchase.
Tax Rate: 15% STCG plus applicable cess and surcharge.
Tax is deducted at source (TDS) by the broker or fund house.
2. Long-Term Capital Gains (LTCG)
Gains on equity shares held for more than 12 months.
Tax Rate: Gains above ₹1 lakh are taxed at 10% LTCG without the benefit of indexation.
LTCG is also subject to TDS at 10% for NRIs.
3. Tax Deducted at Source (TDS) Rules
Brokers or mutual fund houses are required to deduct TDS on gains for NRIs.
STCG TDS: 15% + cess
LTCG TDS: 10% + cess
NRIs can claim relief under Double Taxation Avoidance Agreements (DTAA) if applicable.
4. Other Key Considerations
Dividends: Taxable at 20% TDS for NRIs, subject to DTAA provisions.
Filing ITR: NRIs must file Income Tax Returns if TDS does not cover total tax liability.
Exemptions: Gains from equity shares on recognized stock exchanges are eligible for concessional rates.
5. Compliance Tips for NRIs
Maintain records of purchase, sale, and TDS certificates.
Check if DTAA benefits can reduce tax liability.
File ITR regularly to avoid penalties and claim refunds if TDS exceeds actual tax.
FAQs
Q1. How are NRIs taxed on short-term gains from Indian stocks?
A1. STCG on equities sold within 12 months is taxed at 15% plus cess, with TDS deducted by brokers.
Q2. What about long-term capital gains for NRIs?
A2. LTCG on equities held over 12 months is taxed at 10% on gains exceeding ₹1 lakh, also subject to TDS.
Q3. Are dividends from Indian stocks taxable for NRIs?
A3. Yes, dividends are taxed at 20% TDS for NRIs, though DTAA agreements may reduce the rate.
Q4. Can NRIs claim relief for taxes paid in India?
A4. Yes, under DTAA treaties, NRIs can claim relief to avoid double taxation in their resident country.
Q5. Is filing an Income Tax Return mandatory for NRIs?
A5. Filing ITR is necessary if total tax liability exceeds TDS deducted or if claiming refunds.
Published on : 23rd October
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share