Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Dividends are taxable now
Since 2020, dividends are taxed in the shareholder’s hands (the old dividend distribution tax is gone). For an NRI, the Indian company deducts TDS at 20% plus surcharge and cess on the dividend before paying it. Confirm the current rate per the Finance Act.
Reduce it with a treaty
Most of India’s treaties cap dividend tax at 10–15%. To get the lower rate, give the company (or its registrar) your TRC, Form 10F and PAN before the dividend is paid. Otherwise the full 20% is withheld and you reclaim the excess by filing.
A worked example
Example: you hold shares paying ₹2 lakh of dividends. At 20%, ₹40,000 is withheld; under a 15% treaty rate, ₹30,000 — if your TRC and Form 10F were lodged in time. Any excess comes back when you file an ITR. Dividends also count toward your taxable Indian income, so a large dividend can by itself trigger a filing obligation. One quirk worth knowing: the 20% TDS often exceeds the actual tax an NRI owes on modest dividend income, so filing a return to reclaim the gap is common — the treaty route simply reduces how much is over-withheld in the first place. Keep the company’s TDS certificate to support the claim. Our NRI tax service can manage it.