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TDS on Dividends

NON-RESIDENT SHAREHOLDERS

Tax is deducted at the source of dividend payment to non-resident shareholders if the non-resident shareholders submit and register the following documents with the Company/Company’s RTA – MUFG Intime India Private Limited (previously known as Link Intime India Private Limited)

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Sr. No. Particulars Rate of Deduction of Tax at Source Documents Required (if any)
1 Foreign Institutional Investors (FIIs) / Foreign Portfolio Investors (FPIs) 20% (plus applicable surcharge and cess) FPI registration number/certificate along with documents mentioned in Sr. No 2
2 Other Non-resident shareholders 20% (plus applicable surcharge and cess) or tax treaty rate, whichever is beneficial

35% (plus applicable surcharge and cess) in case of non-residents declaring that they have a permanent establishment in India.

To avail of a beneficial rate of tax as per applicable tax treaty, the following documents would be required:

  1. Copy of the ‘Tax Residence Certificate’ of the shareholder’s country of residence valid for the relevant financial year. In case the TRC is furnished in a language other than English, it must be translated from such other language to English, and thereafter, a duly notarised and apostilled copy must be provided.
  2. Copy of the PAN Card allotted by the Indian Income Tax authorities duly self-attested.
  3. Copy of electronically filed Form No. 41 in the income tax portal for the relevant financial year, along with acknowledgement in the format as attached.
  4. Copy of self-declaration by the shareholder for non-existence of permanent establishment/ fixed base in India
  5. Self-declaration by the shareholder regarding the satisfaction of the place of effective management (POEM), principal purpose test, General Anti Avoidance Rule (GAAR), Simplified Limitation of Benefit test (wherever applicable), as regards the eligibility to claim recourse to concerned Double Taxation Avoidance Agreements.
  6. Declaration under section 390 of Income Tax Act 2025 read with Rule 203 of Income Tax Rules, 2026, where the credit of TDS deducted by the company is to be reported in the name of the beneficial owner of the Dividend Income, which is other than the person whose name is in the shareholder details as per RTA

In case of shareholder being tax resident of Singapore, proof of satisfying requirement of Article 24 – Limitation of Relief, should be provided

(Note: Application of beneficial tax treaty rate shall depend upon the completeness of the documents submitted by the non-resident shareholder and review to the satisfaction of the Company)

3 Indian Branch of a Foreign Bank NIL Lower/nil tax deduction certificate under section 395 obtained from Income Tax Authority. Self-declaration confirming that the income is received on its account and not on behalf of the Foreign Bank.
4 Overseas Trust 20% (plus applicable surcharge and cess) The overseas trust can also be given the tax treaty rate. However, this can be litigated; hence, on a conservative basis, withholding on dividends paid to overseas trusts should be as per the Income Tax Act of 2025 only.
5 Availability of Lower/Nil tax deduction certificate issued by Income Tax Department u/s 395 of Income Tax Act, 2025 The rate specified in the Certificate Lower/Nil tax deduction certificate obtained from Income Tax Authority
6 Alternative Investment Fund – Category III located in International Financial Services Centre 10% (plus applicable surcharge and cess)# Copy of PAN card (if available)

Self-declaration and adequate documentary evidence substantiating the nature of the entity

7 Non-Resident Shareholders who are tax residents of Notified Jurisdictional Area as defined u/s 176 of the Act 30% NA
8 Sovereign Wealth funds and Pension funds notified by Central Government under Schedule V(7) of the Act NIL • Copy of the notification issued by CBDT substantiating the applicability of Schedule V(7) of the Act issued by the Government of India.
• Self-Declaration that the conditions specified in Schedule V(7) have been complied with.
9 Subsidiary of Abu Dhabi Investment Authority (ADIA) as prescribed under Schedule V(7) of the Act. NIL Self-Declaration substantiating the fulfilment of conditions prescribed under Schedule V(7) of the Act
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