What is Section 195 of Income Tax Act, TDS on NRI
Close
Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term Plan

Protect Your family’s financial future with Kotak e-Term Plan. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Health Shield

Insurance against medical expenses related to heart, brain, liver and Cancer. Know more

What is Section 195 of the Income Tax Act? TDS on Non-Residents of India

What is Section 195 of the Income Tax Act? TDS on Non-Residents of India
  • 10th Mar 2021 |
  • 3,707

Non-Resident Indians (NRI) also have to file their tax returns for the income earned in India, just like the resident Indians. Therefore, the income tax payments for an NRI citizen are a bit complex compared to the resident Indians. The tax payment guideline for NRIs is listed in Section 195 of the Income Tax Act.

What is Section 195?

Section 195 of income tax act, 1961 (ITA) provides information on the Tax Deducted at Source (TDS) for all Non-Resident Indians (NRIs).

TDS is the primary way of gathering taxes. It is an efficient way of taking care of tax leakages by withdrawing the Tax at the time of payment and putting the responsibility of TDS on the individual making the payment.

Any amount gained through different business transactions, income or profits is chargeable under the Income Tax Act 1961. Like resident Indians, NRIs can also claim a TDS refund when filing tax returns.

Section 195 of income tax act provides information for TDS for NRI on payments made by NRI citizens. It highlights the tax rates and deductions involved in an NRI citizen’s business transactions. While making the payments, providing the certificate of remittance is compulsory. Section 195 also mentions the guidelines for avoiding a revenue loss from any NRI tax liability by deducting that amount from their source payments.

Steps for deducting TDS under Section 195:

1. The buyer should provide the TAN (Tax Deduction Account Number) number before deducting Section 195 TDS. You can get the TAN by providing the 4B form to the Income Tax department. In addition, the buyer should have their PAN number and the PAN of the NRI seller as well for completing the submission of Form 49B.

2. TDS should be deducted when making payments to the NRI. The transaction contract must include details like the TDS rate and amount.

3. The TDS deducted by the buyer should be deposited through an authorized bank with a challan or a form number. This can be done online, and it should be done by the 7th of the upcoming month.

4. The buyer should file their TDS returns after the TDS has been deposited. The filing should be done quarterly by providing form 27Q and through financial institutions authorized by the Government of India.

5. After depositing the TDS, the buyer should file the TDS returns. The dates provided in the guidelines should be followed for a seamless process. The dates for filing in a particular quarter are by June -July 15, September quarter – October 15, December quarter – January 15 and March quarter – May 15.

6. Once the TDS has been filed, the buyer can provide a TDS certificate to the NRI seller. It is essential that the buyer issue this certificate to the seller 15 days from the due date of filing the TDS returns for the quarter.

Who is a Non-resident?

According to the aforementioned provisions, if a person is not an Indian resident as defined in section 6 of the Act, they are considered non-residents in India.

In any financial year, a person is considered to be a resident of India if they meet the requirements listed below:

if they remain in India for 182 or more days throughout the fiscal year,

if they spend at least 60 days in India during the fiscal year and at least 365 days during the four fiscal years before it.

Who should deduct tax under Section 195?

Any person who makes a payment to a non-resident that is taxable in India (other than a wage or interest as defined in sections 194LB, 194LC, and 194LD) is required to withhold tax in accordance with this section.

A resident or non-resident, a person, a Hindu Undivided Family (HUF), a partnership firm, another NRI, a foreign company, or an artificial juridical entity might be the payer, the one who pays the NRI or remits the payment (for example, a corporation, government agency or non-profit organization).

TDS return and certificates

Any person making a payment to a non-resident must get a TAN and deduct tax at the appropriate rates in light of the provisions of section 195. Within the set deadlines, the payer must deposit the tax withheld with the government against the payee’s PAN. The payer must also provide the TDS return in Form 27Q by the quarterly deadlines and give the non-resident the TDS certificate in Form 16A.

Conclusion

Thus, Section 195 of the ITA provides the rates and deductions for Non-Resident Indians. It focuses primarily on the tax rates and deductions on business transactions with an NRI. The amount generated through these transactions is chargeable under the Income Tax Act. To deduct the TDS on Non-Residents, the steps provided under Section 195 should be followed. Following the guidelines can be helpful for a smooth process of deducting the TDS.

Download Brochure

Features

  • Increasing Life Cover*
  • Guaranteed^ Maturity Benefits
  • Enhanced Protection Through Riders
  • Tax Benefits
  • Dual Benefits: Guaranteed^Maturity + Death benefits

Ref. No. KLI/22-23/E-BB/999

T&C

Browse our library of resources

Download Brochure

Features

  • Enhanced Protection Through Riders
  • Life Cover
  • Tax Savings
  • Multiple Premium Payment Terms
  • Guaranteed @ Loyalty Addion
  • Accrued Guaranteed @ Additions

Ref. No. KLI/22-23/E-BB/490

T&C

- A Consumer Education Initiative series by Kotak Life

Similar Articles

How to e-Verify your Income Tax Return

What is Salary Protection Insurance and Why You Need It

Income Tax Exemption for Physically Handicapped Dependent

Have You Considered Term Insurance a Part of Your Tax Planning?

How can I get Form 16B from traces?

Home Investment Plan to Buy Dream Home

Income-Tax Liability- The Difference Between Gross Income & Total Income in Calculating Income Tax

How to File Income Tax Return - Everything You Need to Know

Guide for Tax Calculation on your Salary

How to save tax for salaried person?

Tax Structure in India

सुकन्या समृद्धि योजना (SSY) के कर लाभ क्या हैं?

How to Check Income Tax Refund Status Online in India

What Investment Options Come with Tax Incentives?

Tax Saving for Self Employed in India

How to Claim TDS Refund for Excess TDS Deduction?

Income Tax Deductions Under Section 80C

How to Check Income Tax Refund Status Online in India

Penalty For Late Filing TDS Return

How to File Form 16 for Salaried Employees?

9 Income Tax Myths That Could Cost You Money while Filing returns

5 Popular Tax-Saving Schemes in India

Why is Form 16 Important?

How to Check Income Tax Returns Status Onine?

What is Section 10D of the Income Tax Act?

What is HRA (House Rent Allowance) and How is HRA Exemption Calculated?

What To Do If Your TDS Is Not Deposited With The Government?

How to File TDS Return?

How to Get Form 16?

ITR 1: Sahaj Form

Union Budget Highlights – 1st February 2022

What is TDS Refund Process?

Income Tax Deductions & Exemptions under Sections 80C, 80D & 80DDB for FY 2021-22 & 2022-23

Tax Saving Options other than Section 80C

How to File Income Tax Return without Form 16

Sub-sections Under Section 80C of the Income Tax Act, 1961

Understanding Tax Exemptions in ULIP (Old and New)

Top 8 Tax-Saving Methods in India- Budget Planning

Challan 280 - How to Use Challan 280 to Pay Income Tax

धारा 80डी आयकर अधिनियम, 1961

ITR-6: Guide to filing ITR-6 Form online

Tips to plan your savings in 2019

Presumptive Taxation for Business and Profession

Income Tax Deduction Under Section 80CCC In India

Investing Lump Sum Amount

Tax Benefit of Investing in Term Plan

Income Tax Filing For NRI in India

Section 80E: Tax Exemption on Interest on Education Loan

What is Form 16B?

How Much Money This Budget 2019 Can Help You Save

A Comprehensive Guide to Understand the ITR 7 Form

What is ITR 5 Form and How to File ITR 5?

What is TDS Exemption Limit?

Why Tax Planning Should Be an All-year Round Activity

What are Direct Taxes? How to Avoid being Overtaxed?

Insurance and Endowment: Everything You Need to Know!

Section 80D - Medical and Health Insurance Tax Benefits Under Section 80D

What is the Percentage of Tax Deducted at Source (TDS)?

Who Should Invest In Savings Plan

Interest Imposed Under Sections 234A, 234B and 234C

Guaranteed Return Plans-Why is it a must for you?

Income Tax Filing Using Multiple Form 16

What is Form 26AS - All You Need To Know

Section 10 (10d) of Income Tax Act, 1961 on Payouts of Life Insurance Policy

Things to Do After Filing Income Tax Returns

Income Tax Slabs and Rates in India for FY 2021-22/AY 2022-23

How to View 26AS and Download Form 26AS Online

Types of Income Tax Return (ITR) Forms

What is Section 80C - Explained in Detail

How to File ITR Online

Are Financial Planning and Tax Planning the Same Thing?

List of Important Income Tax FAQs

What are the Different Types of Taxes in India?

Income Tax Deductions for Disabled Person Under Section 80U

Do Beneficiaries Pay Taxes on Life Insurance?

Pradhan Mantri Suraksha Bima Yojana

Tax Planning and Tax Benefits of Life Insurance

Tax Saving Guide for 2019-20

Tax-Free Income in India

Tax Benefits of ULIP Plans Available for NRIs

Tax Saving Tips: Best Ways to Save Income Tax for 2021

Section 16 of the Income Tax Act (ITA), 1961

How to File Form 10E for Tax Relief on Salary Arrears?

What is Section 80CCC of the Income Tax Act 1961

प्रत्यक्ष कर और अप्रत्यक्ष कर में क्या अंतर है?

TDS Due Dates of FY 2020-21 For Return Filing

Tax Deductions You MUST Know

Financial Planning and Best investment options for Housewives

What is the Difference Direct Tax and Indirect Tax

What is Tax Deduction at Source (TDS)?

Why January Is an Important Month for Saving Tax?

Section 44AD of Income Tax Act for AY 2021-22

What is the Difference between Form 16 and Form 16A?

A Complete Guide for Filing ITR 3 Form

How To Save Tax Better with 80C

Tax Season Is Coming- Know How to Save Tax

इनकम टैक्स रिटर्न कैसे फाइल करें?

How to Pay Advance Tax Online in India

Types of Riders in Insurance Policy

How to e file ITR on Income Tax Government Portal

How to View 26AS and Download Form 26AS Online?

Save Income Tax by 31st March: Here Is a Checklist

Received an Income Tax Notice? Your Guide to Understanding Intimations under Section 143 (1)

Income Tax Exemption for Disabled

Problems People Face with Tax Returns after a Job Change

आयकर स्लैब 2021-2022

Can You Get Term Insurance Without Income Proof?

How To Save Tax Using Life Insurance?

Tax Exemption and Scope of Coverage

Saving Income tax in 2017 - 18

Tax Benefits for Startups in India

What is the Last ITR Filing Date and Penalty for Late Filing of ITR?

How to Save Tax on Salary Arrears?

Tax-Savings Investments and Options in India

E-Filing of Income Tax Returns in India

Investment Proofs You Need Submit To Lower TDS Cut From Your Salary

What is TDS Slab?

Section 80C Deductions as per Income Tax Act, 1961

52 Weeks Savings Plan: Daily Savings Plans for a Better Tomorrow

ITR 2 Form – Complete Guide

Budget 2019: Impact on the Common Man in India

Everything You Need to Know About Tax Benefits of National Pension Scheme (NPS)

All about TDS on Salary under Section 192 – Kotak Life

What is Form 16A?

A Guide to Life Insurance Policy’s Tax Benefits and Taxability

What is ITR & How to File Income Tax Return?

8 Things to Help You Select a Savings Investment plan

What is Section 80C Deduction?

What is Section 80C Deduction Limit?

5 Unusual Investments You Didn't Know for Saving Taxes in India

Tax Saving Options for Salaried Employees

Impact of GST on Life Insurance in India

LTC Cash Voucher Scheme October 2020 – Everything You Need to Know

All You Need to Know About Section 80C

How to File Income Tax Return for First Time Tax Payers

आयकर रिटर्न (आईटीआर) फॉर्म के प्रकार

What Is Advance Tax and How Is It Calculated?

Section 80G of the Income Tax Act

Difference between Section 80C, 80CCC, 80CCD & 80D

Financial Benefits and Government Schemes Every Woman in India Should Know

धारा 80सी आयकर अधिनियम, 1961

How to Download Form 16?

भारत में महिलाओं के लिए सरकारी योजना

When Should TDS be Deducted and Who is Liable to Deduct it?

What is the TDS Rate on Salary?

What is Tax Evasion and What Are The Penalties For Tax Evasion In India?

All about TDS Payment Online & Due Dates

How to Save Income Tax with Insurance

Income Tax Benefits for Doctors

How to file Form 16 online?