How can NRIs (Non-Resident Indians) handle taxes on stock investments?

NRIs (Non-Resident Indians) investing in Indian stocks are subject to taxation based on capital gains. They must comply with tax deducted at source (TDS) rules, double taxation avoidance agreements (DTAA), and file tax returns in India if applicable.

1. How Are NRIs Taxed on Stock Investments in India?

NRIs investing in Indian stocks through NRE or NRO accounts are subject to capital gains tax:

• Short-Term Capital Gains (STCG): If shares are sold within one year, a 15% tax applies.
• Long-Term Capital Gains (LTCG): Gains above ₹1 lakh after one year are taxed at 10%.
• TDS for NRIs: Tax is deducted at source (TDS) before NRIs receive their investment profits.

2. What Is TDS on NRI Stock Gains?

For NRIs, tax is deducted at the source before receiving sale proceeds:

• STCG TDS: 15% of gains is deducted.
• LTCG TDS: 10% TDS is applied if gains exceed ₹1 lakh.
• No TDS for DTAA Countries: If an NRI belongs to a DTAA country, they can claim lower tax benefits.

3. How Does DTAA Benefit NRIs?

India has tax treaties with several countries to avoid double taxation:

• Lower TDS Rates: Countries with DTAA have reduced tax rates on capital gains.
• Tax Credits: NRIs can offset Indian taxes against taxes in their resident country.
• Exemptions: Some countries exempt Indian capital gains tax for NRIs.

4. How Can NRIs File Tax Returns in India?

NRIs must file tax returns if they have taxable income in India:

• Income Above ₹2.5 Lakh: NRIs must file returns if total Indian income exceeds ₹2.5 lakh.
• Claim Refunds: If excess TDS is deducted, NRIs can claim a refund by filing ITR.
• Use Form 67: NRIs claiming DTAA benefits must submit Form 67.

NRIs must comply with Indian tax laws when investing in stocks. Understanding capital gains tax, TDS deductions, DTAA benefits, and tax return filing can help NRIs optimize their investments while ensuring legal compliance.