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Are dividends earned by an NRI from an Indian company taxed?

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With the removal of the Dividend Distribution Tax in Finance Bill 2020, dividends earned from an Indian company are taxable in the hands of the shareholder effective 1st April 2020. An NRI can avail DTAA to reduce the tax burden further as applicable. In some countries, the tax rate on dividends ranges between 5-15%. This can benefit the NRI where their country of residence has signed DTAA with India.

Tax Rates on Dividend income

Particulars

Tax Rate

Dividend income from shares of an Indian company purchased in foreign currency or any other case

20%

Dividend on GDRs of an Indian Company or Public Sector Company (PSU) purchased in foreign currency

10%

As per Income tax rules, TDS is required to be deducted before making any payment to the NRI. Thus, an NRI is paid the dividend post deducting TDS at below rates.

Tax Rates on Dividend income

Particulars

Tax Rate

Dividend on GDRs of an Indian Company or Public Sector Company (PSU) purchased in foreign currency

10%

Dividend income from shares of an Indian company purchased in foreign currency.

20% or rate as prescribed in DTAA whichever is lower

Dividend income in any other case

30% or rate as prescribed in DTAA whichever is lower


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