What is TDS for NRIs?

TDS (Tax Deducted at Source) is a tax collection method where the payer deducts tax from the income and deposits it with the government. According to Section 195 of the Income Tax Act, TDS applies to payments made to NRIs for income earned in India, such as interest from bank deposits, rental income, dividends, and more.

However, NRIs are not allowed to use Form 15G/15H (which allows residents to avoid TDS deductions) to reduce their TDS deductions. Instead, NRIs must apply directly to the Assessing Officer (AO) to obtain a Lower TDS Certificate.

Who Can Apply for a Lower TDS Certificate?

NRIs who have substantial income or income exceeding the basic exemption limit in India may be eligible to apply for a Lower TDS Certificate. This certificate helps NRIs avoid over-deduction of taxes at source, especially when their total income falls below the taxable threshold or when specific exemptions apply. TDS for NRIs on property sales income in India can be a key consideration when applying for this certificate.

How to Apply for a Lower TDS Certificate?

The process to apply for a Lower TDS Certificate involves submitting Form 13 to the Assessing Officer (AO). Below are the steps to follow:

Step-by-Step Process:

• Log in to TRACES Portal: Visit the official TRACES portal to begin the application process.
• Navigate to the “Request for Form 13” section: Locate the option to apply for a Lower TDS Certificate on the portal.
• Provide Necessary Details: Select the residential status (NRI) and specify the request type (original).
• Fill in Income Details: Provide a detailed breakdown of your income, tax liabilities, and the amount for which you want to claim a reduced TDS deduction.
• Upload Supporting Documents: Income statements, tax liabilities, and a projection of income for the current year. Any relevant documents such as previous tax returns, assessment orders, and financial statements for business or professional income.
• E-Verify the Application: Use Aadhaar OTP, Net Banking, or Digital Signature Certificate (DSC) to verify your application.

What Happens After Submitting Form 13?

Once you’ve submitted Form 13, the Assessing Officer (AO) will review your application. Here’s what follows:

• Verification by the AO: The AO reviews your application and supporting documents. The Income Tax Department’s software may suggest a lower TDS rate based on the details you provide.
• Decision by the AO: The AO can either approve or reject your application. If approved, a Lower TDS Certificate is issued with details on the reduced rate and the period of validity.
• Certificate Details: The certificate includes:  ◦ The approved TDS rate.  ◦ The period it applies to.  ◦ The TAN of the deductor.

What Documents are Required for Form 13?

To support your application for a Lower TDS Certificate, the following documents need to be submitted along with Form 13:

• Form 13 (duly signed).
• Income Tax Return (ITR) acknowledgment for the last 3 financial years.
• Copies of assessment orders for the past 3 years.
• Projected income and financial details for the current financial year.
• PAN card copy.
• Tax Deduction Account Number (TAN) of the payer.
• Financial statements (if you have a business or professional income).
• Other documents based on the nature of income.