NRI Tax Rates on Indian Equities
Statutory reference for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) investing in the Indian stock market (NSE / BSE). Every rate is cited directly from official Government of India enactments and CBDT notifications.
This reference compiles statutory provisions under the Finance (No. 2) Act, 2024, the Income Tax Act, 1961, and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Non-resident taxation depends on treaty residency, DTAA provisions, and individualized filing status. Always verify your specific tax computation with a certified Chartered Accountant (CA) or tax attorney.
1. Capital Gains Tax on Listed Indian Equities
Applies to shares listed on recognized Indian stock exchanges (NSE/BSE) where Securities Transaction Tax (STT) is paid.
| Category | Holding Period | Tax Rate | Exemption Threshold | TDS Deducted (NRIs) | Official Statutory Source |
|---|---|---|---|---|---|
Long-Term Capital Gains (LTCG) Section 112A & Section 195 of Income Tax Act, 1961 | More than 12 months (> 365 days) | 12.5% | ₹1,25,000 per financial year (aggregate across all Section 112A LTCG) | 12.5% + applicable surcharge + 4% cess on gains above ₹1.25L | Income Tax Department (CBDT) Portal — Section 112A |
Short-Term Capital Gains (STCG) Section 111A & Section 195 of Income Tax Act, 1961 | 12 months or less (≤ 365 days) | 20.0% | Nil (taxable from the first rupee of gain) | 20.0% + applicable surcharge + 4% cess | Income Tax Department (CBDT) Portal — Section 111A |
Long-Term Capital Gains (Unlisted Equity) Section 112(1)(c) & Section 115E of Income Tax Act, 1961 | More than 24 months | 12.5% | Nil | 12.5% + applicable surcharge + 4% cess (without forex fluctuation or indexation) | Income Tax Department (CBDT) Portal — Section 112 |
Crucial NRI Distinction: Unlike resident investors (where brokers do not deduct TDS on equity trades), for NRIs, tax is deducted at source (TDS) under Section 195 by the bank or custodian at the maximum applicable rate at the time of credit. If actual tax liability is lower (e.g. after utilizing the ₹1.25L LTCG threshold across multiple brokers), the NRI must file an Indian Income Tax Return (ITR-2) to claim a refund.
2. Dividend Income & Withholding Tax (TDS)
Tax deducted by Indian companies when paying dividends to Non-Resident shareholders.
| Income Type | Domestic TDS Rate | DTAA Treaty Relief | Required Compliance Documents | Statutory Authority |
|---|---|---|---|---|
Dividends paid by listed Indian domestic companies to Non-Resident shareholders Section 115A(1)(a)(i) & Section 195 of Income Tax Act, 1961 | 20.0% + applicable surcharge + 4% cess (Section 195) | Typically 10%–15% depending on treaty country (e.g. USA: 15%–25%, UAE: 10%, Singapore: 10%–15%, UK: 15%) | Valid Tax Residency Certificate (TRC) + Form 10F electronically filed on incometax.gov.in + Permanent Account Number (PAN). Verify treaty rate with a chartered accountant. | Income Tax Department (CBDT) Portal — Section 115A |
Domestic Dividend TDS Threshold (Section 194 Statutory Comparison) Section 194 of Income Tax Act, 1961 | N/A (NRIs governed by Section 195 @ 20% without basic threshold) | N/A (Statutory comparison with resident threshold) | Section 194 threshold increased from ₹5,000 to ₹10,000 effective 1 April 2025. Resident individual investors exempt if aggregate dividend per company ≤ ₹10,000 in FY. Verify with a chartered accountant. | Income Tax Department (CBDT) Portal — Section 194 |
Section 194 vs. Section 195 Distinction: For resident individuals, Section 194 imposes 10% TDS only if total dividend paid by a company exceeds ₹10,000 in a financial year (statutory threshold increased from ₹5,000 effective 1 April 2025). However, Non-Resident Indians (NRIs) are governed by Section 195, which requires 20% withholding on the full dividend amount without this exemption threshold, unless lower rates are certified under an applicable DTAA double-tax treaty. Verify the latest rule with a chartered accountant.
3. Outward Remittances & TCS (Section 206C(1G))
Tax Collected at Source on Liberalised Remittance Scheme (LRS) funds for overseas equity investments and family transfers.
No TCS is collected on outward remittances up to ₹10 Lakh per financial year. Above ₹10 Lakh, authorized dealer banks collect 20% TCS on remittances for overseas equity investments.
Remittances originating from foreign-currency NRE accounts are foreign capital transfers and exempt from Section 206C(1G) TCS. For outward remittances from resident or NRO accounts under the Liberalised Remittance Scheme (LRS), TCS applies only after crossing ₹10 Lakh in the financial year. TCS paid is an advance tax credit adjustable against final tax liability or refundable via ITR. Verify the latest rule with a chartered accountant.
4. Surcharge & Health & Education Cess Slabs
Statutory ceiling protecting equity capital gains and dividends from punitive high-bracket surcharges.
| Total Taxable Income Slab | Equity Gains & Dividend Surcharge | General Income Surcharge | Statutory Provision |
|---|---|---|---|
| Up to ₹50 Lakh | Nil (0%) | Nil (0%) | Base tax + 4% Health & Education Cess only |
| ₹50 Lakh to ₹1 Crore | 10% | 10% | Section 111A, 112A and Dividend surcharge capped at 10% |
| ₹1 Crore to ₹2 Crore | 15% (Capped) | 15% | Surcharge on equity capital gains & dividend capped at 15% |
| Above ₹2 Crore | 15% (Capped) | 25% (New Regime) / 37% (Old Regime) | Section 111A & Section 112A capital gains benefit from the statutory 15% ceiling |
Health & Education Cess: A flat 4% cess is added to the total of base income tax plus applicable surcharge across all income brackets without exception.
5. NRI Banking Architecture: NRE vs. NRO
Official Reserve Bank of India (RBI) foreign exchange and account classification rules.
6. Portfolio Investment Scheme (PIS) vs. Non-PIS Route
Mechanism mandated by the Reserve Bank of India to track foreign ownership caps in Indian companies.
Portfolio Investment Scheme (PIS)
Applicability: Mandatory for secondary market equity purchases on repatriation basis (linked to NRE account).
RBI Investment Ceiling: Individual ceiling: 10% of total paid-up equity; Aggregate NRI ceiling: 24% of paid-up equity (unless company passed special resolution to expand).
Trade Reporting: Every equity trade is monitored and reported daily by the designated AD Category-I bank to RBI to prevent exceeding statutory foreign ownership thresholds.
Non-PIS Route
Applicability: Applicable for investments made on a non-repatriation basis through an NRO trading account.
RBI Investment Ceiling: Treated on par with domestic investments for ceiling monitoring (subject to overall FDI sectoral caps).
Trade Reporting: Simpler onboarding with zero RBI trade-by-trade reporting fees; seamless execution across standard stockbrokers.
7. Double Tax Avoidance Agreements (DTAA) & Form 10F
Statutory framework under Section 90 of the Income Tax Act to prevent double taxation on cross-border income.
Under Section 90(2) of the Indian Income Tax Act, 1961, an NRI has the legal option to be taxed either under domestic Indian income tax law or the Double Taxation Avoidance Agreement (DTAA) with their country of residence, whichever is more beneficial.
- Tax Residency Certificate (TRC) issued by the revenue authority of the residence country for the relevant assessment year.
- Form 10F furnished electronically via the Indian e-Filing portal (mandatory under CBDT Notification No. 03/2022).
- No Permanent Establishment (PE) declaration.
- Valid Permanent Account Number (PAN) linked to the NRI trading account.
Have Specific Questions on Your Tax Liability?
While StockRadar24 continuously updates statutory rates from official Gazette notifications, tax liability depends on your country of residence, physical presence tests, and double-tax treaty wording.