What is Sec 195 of Income Tax Act?

Asked by: Prof. Keshawn Hudson MD  |  Last update: September 25, 2023
Score: 4.4/5 (12 votes)

Section 195 of Income tax act, 1961 mandates the deduction of Income tax from payments made to Non Resident. The person making the remittance to non – resident needs to furnish an undertaking (in form 15CA) accompanied by a Chartered Accountants Certificate in Form 15CB. 1.

Who is required to deduct TDS u/s 195?

Under the provisions of section 195, any person who is responsible for paying any interest or any other sum chargeable to tax is liable to deduct tax at source. This is applicable in a case where the payment is being to a non-resident(excluding company) or a foreign company.

How do I claim TDS deducted from US 195?

After the process of TDS deposition as per Section 195, the buyer has to file the TDS return through the computerised medium by submitting the Form 27Q. Upon filing the TDS returns under Section 195, the buyer can issue a TDS certificate, referred to as the Certificate of Tax Deduction or Form 16A, to the NRI seller.

How do I apply for Section 195?

However, no format was prescribed for making the application under sub-section (2) of section 195. Therefore, the deductor has to write an application on plain paper and physically submit it to the Assessing Officer. In order to overcome from these hardships, CBDT notifies vide Notification No.

How can NRI avoid TDS?

The best way for an NRI to avoid paying a high TDS is to open a Non Resident Ordinary Rupee Account (NRO), a Foreign Currency Non Resident Account (FCNR) and a Non Resident External Account (NRE).

Payments covered under Section 195 of Income Tax Act +91-9667714335

39 related questions found

Can NRI claim TDS refund?

NRIs can easily claim TDS refunds on income earned from India. Owing to Section 195 of the Income Tax Act, TDS deductions for NRIs are applicable to every type of income.

Is NRI liable to deduct TDS?

Act 1961 will have no jurisdiction over such a Non-resident. Therefore, the Non-resident will not be under an obligation to deduct tax at source from payments made to persons resident in India for professional or other services.

How buyer can deduct TDS u/s 195 if they are buying a property from NRI ie property sale by NRI?

TDS is to be deducted by the buyer as per provisions of Section 195. The surcharge shall be subject to marginal relief: Where income exceeds Rs. 50 lakhs, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs.

How do I get a certificate under section 195 2?

Section 195(2) of the act empowers the CBDT to prescribe the form and manner in which online application can be made to the Assessing Officer to determine the appropriate proportion of sum chargeable to tax on which tax is required to be deducted by the deductor.

Can NRO tax be refunded?

Any interest credited to NRI individuals, irrespective of the amount, is the net amount (post TDS deducted amount). This means that an NRI earning interest income from NRO account as the only source of income, can avail income tax refund for income up to Rs. 10,000 earned in India.

Who is liable to deduct TDS?

Any person making specified payments mentioned under the Income Tax Act is required to deduct TDS at the time of making such specified payment. But no TDS has to be deducted if the person making the payment is an individual or HUF whose books are not required to be audited.

Is surcharge and education cess applicable on TDS u/s 195?

Rate of TDS under Section 195

For payments made according to DTAA rates, no additional education cess or surcharge is applicable.

Who is called NRI in India?

'Non-resident Indian' is an individual who is a citizen of India or a person of Indian origin and who is not a resident of India.

How can NRI avoid TDS on property sale?

To reduce the TDS on Sale of Property by NRI, the NRI is required to file an application in Form 13 with the Income Tax Department for issuance of Certificate for Nil/ Lower Deduction of TDS.

How can I avoid paying tax on selling property in India?

One of the ways to save on your capital gains tax is to invest in bonds within six months of the trading of the property and receiving the gains. On investing in bonds, you can claim a tax exemption under Section 54EC of the Indian Income Tax Act, 1961.

What happens when NRI sells property in India?

For a non-resident seller, tax is required to be deducted at source at 20% (plus applicable surcharge and cess) in case of sale of long-term property and at 30% (plus applicable surcharge and cess) in case of sale of short-term property.

Is there TDS on NRE account?

Section 6 of the ITA defines non-resident status. TDS applies to such non-residents for any amount generated from business transactions in India. The amount may or may not be an income of a profit. NRIs have to pay TDS even for income types from which resident Indians are exempt, like dividends on mutual funds.

How much TDS is deducted on property from NRI?

TDS deductible

When an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years(reduced from the date of purchase) a TDS of 30% shall be applicable.

Can NRI sell property in India without RBI permission?

The NRIs/ PIOs can freely rent out their immovable property in India without seeking any permission from the Reserve Bank. The rental income being a current account transaction is freely repatriable outside India.

Is NRI income taxable in India?

By default, income earned by an NRI abroad is not taxable in India. But if the income in India through aspects like capital gains from investments in shares, mutual funds, property rental and term deposits exceed the basic exemption limit as defined in the Income Tax Act, an NRI would have to file a tax return.

Is NRE account taxable?

Interest income from non-resident (External), or NRE, accounts (savings and fixed deposits) earned by an individual is exempt from tax in India, provided the individual qualifies as a “person resident outside India“ under the exchange control law or is a person who has been permitted by the Reserve Bank of India (RBI) ...

How long NRI can stay in India?

Until FY 2019-20, NRI status India was given to those Indians settled abroad who visited India for less than 182 days in a financial year. According to the new rule, the time period has been reduced to 120 days.

What happens to my FD if I become NRI?

It is mandatory: As per the Foreign Exchange Management Act (FEMA) guidelines, NRIs cannot hold resident FDs. They must convert it to an NRO deposit account. There is a penalty if you do not get the conversion done.

Can NRI hold FD in India?

NRIs can open fixed deposits in India. Two main types of fixed deposit they can open are NRE and NRO fixed deposits. NRI FDs offer several benefits. NRI fixed deposit rates in India are at par with FD rates of residents.