Revised Procedure for NIL or Lower TDS Certificate: NRIs and Resident Indians

Revised Procedure for NIL or Lower TDS Certificate: NRIs and Resident Indians

Revised Procedure for NRIs to Obtain Nil or Lower TDS Certificates

Non-Resident Indians (NRIs) are subject to TDS if they earn any income from India. If the NRIs are looking to prevent TDS deduction in India, then they are required to obtain Tax Deduction at Source (TDS) certificates from the revenue authorities. The Central Board of Direct Taxes (CBDT) has recently implemented a revised procedure to obtain TDS certificates by NRI by issuing a circular on 27th September 2023. Let’s understand what is the procedure for NRIs to obtain TDS certificates.

Revised Procedure for NRIs to Obtain TDS Certificates

Unlike the normal resident Indians, NRIs cannot use the usual Form 15G/15H to prevent TDS on their incomes. They need to apply to the assessing officer for lower or Nil TDS certificates by filing Form 13 of income tax. One of the significant improvements in the process is the removal of multiple verification methods for submitting the form. Earlier, there were Aadhaar and mobile OTPs. But now, the form can be filed only by using the Digital Signature Certificate (DSC) on the TRACES NRI website.

If you wish to request for reduced or NIL TDS certificate, you need to submit an application online in Form 13 of TDS and verify using it through DSC. Once the application is verified, the assessing officer will further process the application. He will review the reasons and justifications provided for lower or NIL TDS rates. The TDS rate suggested by the income tax department’s software is assessed which can either be lower, NIL or the current TDS rate. If both the AO and the software suggest continuing the current TDS rate, then the application for NIL or lower TDS rate is rejected.

In case the AO approves the NIL or lower TDS rate for NRI, then a certificate is issued by the income tax department specifying the TDS rate, applicable time frame and Tax Deduction and Collection Account Number (TAN) alongside other details. If the AO opts for a different TDS rate, then an explanation shall be provided for the same by the AO.

When requesting for the NIL or lower TDS rate, the TAN of the deductor needs to be provided. Thus, the TDS certificate for NIL or lower TDS is provided for the specified deductor or specific transaction and it shall remain valid for one financial year.

Which Incomes are Commonly Subject to TDS for NRIs?

In most cases, NRIs have interest, rent and dividend income in India that are subject to TDS. Apart from that, the TDS applicability depends on the type of income earned by the NRI. Anyone making a payment to the NRI must deduct TDS as per the provisions of the income tax law.

TDS Certificates for Indian Residents

In the case of Indian residents willing to apply for lower or NIL TDS certificates, additional verification methods have been introduced for Form 13 applications for lower or NIL TDS certificates. Earlier, it was limited to Electronic Verification Codes (EVC) and Digital Signature Certificates (DSC). Now you can even use the Aadhaar and mobile OTP option. It should be noted that Indian residents with income above the basic exemption limit cannot use Form 15G or 15H to avoid tax deductions. They need to use Form 13 and submit the application on the TRACES portal.

Above are the complete details associated with the new procedure for the TDS certificate. For more such useful information and queries, contact the ASC Group now!


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