TDS Exemption Certificate (TEC) - For NRIs, OCIs, PIOs, Others
Generally, all kind of income earned by NRIs, OCIs in India attract TDS provisions. TDS also get deducted at the highest rate of tax i.e. 30%, which is as per the provisions of section 195 generally. Hence, generally, a situation arise that TDS deducted in a tax year is always more than the total tax liability for that tax year. In such situation, NRI need to claim excess TDS back by filing an ITR. Refund takes a lengthy time. This is more painful in property sale transactions by NRIs as the TDS is deducted on full sale consideration by the buyer. This situation can be avoided by getting no TDS deducted or less TDS deducted. For the same, NRI can apply to their assessing officer to issue him a Full/Partial TDS Exemption Certificate (TEC). NRI can submit this TEC to the payer of income. Consequently, the payer will, as per the exemption granted in TEC, either not deduct TDS or deduct it at a lower rate.
Few Situations When TEC Can Be Helpful:
- Sale of Immovable Property by NRIs, OCIs: When an NRI plan to sell a property in India, the buyer propose a rate of 20% (long term) or 30% (short term) plus surcharge & cess on total sales amount. In many or most of the cases capital gain, which attract this proposed rate of tax, is much less than the sales consideration. Hence, it causes lot of pain at the seller hands (ie NRI/PIO/OCI). Getting this much TDS deduction certainly leads to a situation where tax refund need to be claimed which can be time taking process. Hence, to avoid this inconvenient situation, NRIs/OCI can approach to the Income Tax Department for Lower TDS or Nil TDS Certificate.
- Re-investment of Capital Gain Money: In case of long term capital gains (house or other property), NRI can avoid taxation on capital gains by choosing to re-invest the funds in some Capital Gain Tax Saving Tools (i.e. new house or infra bonds). In such case also, NRI can apply to AO for a TEC.
- Total Income Within Exemption Limit: If NRI’s total taxable income in India during a FY is less than the exemption limit. In this case the tax liability shall be nil. Hence, if any TDS is deducted, NRI will have to claim it back by filing ITR. The same can be avoided by applying Full TEC and submitting the same with Payer of Income.
- Total Income Within Lower Slab Limit: If NRI’s total taxable income in India during a FY is falling within lower slab rates e.g. if NRI total taxable income is 5 lac Rs (FY 2012-13 or FY 2013-14) the tax liability shall be 30,000 Rs (i.e. 10% of 2 Lac to 5 Lac slab), however, the TDS can be much more. In such situation also, NRI can choose to apply for Partial TEC.
- Application of DTAA: If as per DTAA, the tax rates on NRI income is lesser then NRI can seek the course of applying TEC to get the TDS deducted as per the rates prescribed in DTAA e.g. Interest Income.
Process For TDS Exemption Certificate
- Preparation of Application (Form 13).
- Preparation & Arrangement of Supporting Documents (Tax Computation, Passport Copy, Income Tax Records of Previous Years, Income and Deduction Related Docs etc).
- Application gets filed online.
- Creating Login id on TRACES website i.e. tdscpc.gov.in .
- After login, feeding all necessary information and enclosing all necessary documents, and then application gets submitted online.
- After submission of online application, the file will go to jurisdictional assessing officer.
- Thereafter, there may be any query or further clarification requirement, which shall be created by the AO online.
- Clarification/submission of requisite information/documents as per remarks/query of AO.
- Besides, liaison wit AO office can also be helpful to expedite the case.
- Once the AO is satisfied with all the needful, he decides the appropriate rate and issue the TDS Certificate for Nil Rate or Lower Rate.
Where NRI Tax Service Can Be Helpful:
- I am an NRI and presently planning to sell an immovable property in India. However, my buyer is offering me to deduct TDS @ 20% plus surcharge on full sale value amount. My actual tax will not be so much. Hence, I want a consultant who can I advise me to get a lower TDS Certificate on this transaction?
- I am a Person of Indian Origin and presently holding OCI Card. I want to apply for a lower TDS or Nil Rate TDS Exemption Certificate?
- How to prepare TDS Exemption Certificate Application?
- What are the step for applying TDS Exemption Certificate for NRIs?
- Whether NRIs can apply for lower or Nil Rate TDS Certificate from Income Tax Department in India? What is the process?