Lower TDS Certificate For NRI: New TDS Certificate Rules Applicable to NRIs
- Farheen Mukadam
- Jul 9
- 8 min read
If an NRI has received any income in India, they are liable for TDS. Non-resident Indians (NRIs) who wish to avoid tax deductions on their income produced in India now have a revamped process to get tax deducted at source (TDS), as per a CBDT update made on September 27, 2023. NRIs cannot use Form 15G/H to skip the TDS deduction, unlike Indian residents. To obtain a zero TDS certificate, they must instead apply directly to the assessing officer. In this article, we will explain the steps involved in obtaining TDS certifications for non-resident Indians in detail.
Table of Contents
What is TDS for NRI?
Tax Deducted at Source, or TDS, is a technique of collecting taxes in which the taxpayer takes money out of the transaction amount and sends it to the government. Section 195 of the Income Tax Act states that TDS is applicable to payments made to non-resident Indians (NRIs) for income received in India, including dividends, interest from bank accounts, and rental income. The key features of section 195 include:
Anyone who is in charge of paying an NRI is subject to Section 195. Regardless of whether they have taxable income in India or not, this includes individuals, Hindu undivided families, partnership firms, domestic or international companies, non-residents, entities with exempt income in India, and any other legal entity.
With the exception of salary payments (covered under Section 192) and interest payments (covered under Sections 194LB, LC, and LD), TDS must be withheld from all payments made to an NRI.
When the money is credited to the NRI's account or payment is made in cash/bank, whichever comes first, the deduction takes place.
The TDS deduction under Section 195 does not have a minimum threshold value.
Incomes Subject to TDS for NRIs
Interest, rent, and dividends are among the common income sources for non-resident Indians (NRIs) in India that are liable to tax deduction at source (TDS). The NRI's income type determines whether TDS is applicable. Income tax regulations pertaining to TDS must be followed when making payments to NRIs. TDS must be subtracted by the payer and deposited with the Indian tax authorities. The type of income, such as interest income from bank accounts or rental income from real estate, affects the TDS rates. According to tax rules, domestic corporations' dividend payments are likewise liable to TDS.
TDS deduction and adherence to relevant regulations are the payers' responsibilities. In order to support the proper tax treatment of their income, NRIs should make sure the payer is deducting the correct amount of TDS and supply any supporting paperwork. When completing their tax returns, non-resident Indians (NRIs) are required to include their Indian income and TDS. They are also eligible to seek credit for the TDS that was withheld. Both NRIs and payers can steer clear of possible legal problems and fines by being aware of TDS regulations and making sure they are followed.
Application for Zero or Lower TDS Certificate for NRI
The payer can request for a lower or nil deduction certificate from the Assessing Officer (AO) by submitting a Form 15E if they think a non-resident in India is not required to pay tax on all or a portion of the amount (apart from salary). By acquiring a TDS certificate, non-resident Indians (NRIs) can stop tax deductions on income received in India. NRIs cannot file Form 15G/H to prevent TDS deductions from their income, unlike residents. Instead, they must seek a reduced or zero TDS certificate from the assessing officer. With this certificate, they can request that the payer either deduct TDS at a lower rate or not at all.
To put it another way, people whose income exceeds the basic exemption limit must apply for a zero deduction certificate instead of using Form 15G/H to lower TDS rates. For instance, TDS deductions may result in interest losses for a person who has a sizeable investment of Rs 90 lakh in fixed deposits.
Who Can Apply for a Lower TDS Certificate
NRIs may be able to apply for a Lower TDS Certificate if their income is significant or above India's basic exemption threshold. When an NRI's total income is below the taxable threshold or when certain exemptions apply, this certificate assists them avoid over-deducting taxes at the source. When applying for this certificate, TDS for NRIs on property sales revenue in India may be a crucial factor. See our in-depth blog for additional information.
Benefits of Lower TDS Certificate for NRI
Decreased Tax Liability: For NRIs, the main advantage of the lower TDS certificate is a decrease in tax obligations. For long-term capital assets, TDS is normally subtracted at a rate of 12.50 percent of the sale profits; for short-term capital assets, it is subtracted at a slab rate. NRIs can, however, benefit from a lower tax rate or a zero tax rate, which can be as low as 0% for both short-term and long-term capital assets, when they have a lower TDS certificate (also known as a TDS Exemption Certificate).
Speedy Refunds: Even if NRIs initiate a TDS refund claim procedure, it can be time-consuming. A lower TDS certificate can expedite the process and ensure faster reimbursements.
Time-saving: You can save a significant amount of time and effort by obtaining a lower TDS certificate for an NRI. An application and accompanying documentation must be submitted to the Indian Income Tax Department in order to acquire the certificate.
Compliance: By acquiring the lower TDS certificate, NRIs can guarantee adherence to Indian tax regulations. The certificate guarantees that the tax liability is paid accurately and eliminates the possibility of non-compliance and related legal repercussions.
How to Apply for a Lower TDS Certificate by Filing Form 13?
You must submit Form 13 to the assessment officer in order to request a reduced deduction certificate. A lower TDS certificate can then be issued after the review of the form by the assessing officer (AO). Below are the steps for submitting Form 13 to the AO to apply for a reduced deduction certificate:
Step 1: Access the Traces site and log in.
Step 2: Go to the "Statements/Forms" section.
Step 3: Select "Request for Form 13."
Step 4: Choose your residential status.
Step 5: Select "original" as the request type.
Step 6: Choose the relevant financial year.
Step 7: Select "online" as the application type.
Step 8: The approved person's basic information will be automatically filled up when they register on the TRACES portal.
Step 9: Type the district and state.
Step 10: Provide the TDS/TCS deduction to be claimed, the nature of the receipt, and the relevant TAN.
Step 11: Upload the income and tax obligations for the previous four years as well as the current year.
Step 12: E-verify using a digital signature, net banking, TRACES-registered mobile number, or Aadhaar OTP.
Documents Required to be Submitted with Form 13 for a Lower TDS Certificate
The following documents have to be submitted to support your claim for a Lower TDS Certificate:
Form 13 (signed properly)
Acknowledgement of income tax returns (ITRs) for the previous three financial years
Copies of the previous three years' worth of evaluation order
Financial information and income projections for the current fiscal year
Copy of the PAN card
The payer's Tax Deduction Account Number (TAN)
Financial statements (whether you earn money from a business or a job)
Additional records according to the nature of income
E-TDS return acknowledgment for the last 2 financial years
TDS default that took place earlier
What Happens After Filling Out For 13 for a Lower TDS Certificate
After the submission of a Form 13 application for a reduced or zero TDS rate, the following steps can be expected:
The application is assessed thoroughly by the TDS Assessing Officer (AO). They check the arguments and supporting documentation.
To determine the suggested TDS rate, the AO looks at the income tax department's software. A lower, zero, or unaltered rate may be suggested by the software.
In case of approval, the applicant receives a certificate. The certificate provides the deductor's TAN and other information, as well as the decreased TDS rate and the time period it pertains to. On the other hand, the application is turned down if both the software and the AO concur that the existing TDS rate is suitable.
The TDS certificate contains precise information regarding the authorized reduced or zero rate, such as the validity period, which might be one fiscal year or a single transaction and the tax deductor's TAN and other details.
The AO must provide a valid reason for its judgment on approving a TDS rate that is not the same as the software's suggested rate.
Only the designated deductor is permitted use the lower or nil TDS certificate; it is not generally applicable to all deductors for the NRI.
The procedure guarantees that the application for a reduced or zero TDS rate is carefully examined and that the AO's decisions are transparent and well-founded.
Conclusion
Following completion and submission to the jurisdictional assessing officer, the application must be processed within 30 days of receipt. Before approving or disapproving the application, the evaluating officer examines the data and supporting documentation provided and may request more information. It can be a bit difficult to comprehend the NRI tax requirements and to file Forms such as Form 13. However, it is equally typical to have questions about taxes. As a result, seeking expert assistance can help guarantee a seamless tax filing process.
Frequently Asked Questions
Can NRI apply for a lower deduction certificate?
Rather than using Form 15G/H as residents do, non-residents must apply for a reduced or zero TDS certificate. Form 13 has to be submitted online with a Digital Signature Certificate (DSC) being used for the application validation.
How can NRIs lower TDS on property sales?
By getting a Certificate of lower or no deduction, non-resident individuals (NRIs) can seek lower TDS rates or claim exemptions. This certificate reduces their TDS liability and is essential for specific transactions.
What is a lower TDS certificate for NRI?
NRIs are not permitted to lower the TDS deduction on their incomes with Form 15G/H. Rather, they require a lower or zero TDS certificate, which has to be obtained from the assessing officer. The income payer can then deduct taxes at a reduced rate or not at all.
What is the deadline for filing Form 13?
The annual deadline for submitting Form 13 is March 15. For instance, the deadline for submitting Form 13 is March 15, 2026, if you wish to claim the lesser deduction of TDS for 2025.
How much time to get a lower TDS certificate for NRI?
Since the evaluating officer must forward the application to the TDS officer and their superiors, processing the LDC normally takes three to six weeks. The LDC's validity is given for a given fiscal year at a set rate that corresponds to the real capital gains.
Is TDS compulsory for NRI?
The payor has to deduct TDS from payments made to NRIs under Section 195 of the Income Tax Act. Form 15CA must be filed online and submitted by the person sending the money to a non-resident.
What are the TDS rules applicable to NRI property sales?
For homes sold before two years, the TDS rate is 30%. These gains are subject to higher tax rates of 30% and are referred to as short-term capital gains. However, if a resident buys a property from an NRI, they must deduct 20% TDS on the that have been retained for more than two years.
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