Can a broker's software legally override actual portfolio capital gains for NRI TDS calculation

Broker software cannot legally override tax laws. The incorrect deduction is a result of technical failure, not tax liability. You should formally demand that the broker correct their TDS reporting, but your primary remedy is to claim the excess TDS as a refund by declaring the true capital gain in your ITR-2 filing. For future large transactions, consider obtaining a Lower Deduction Certificate (Form 13) to prevent this from recurring.

Your broker has made a computational error. The Income Tax Act does not allow treating bonus shares as isolated zero-cost assets when the sale covers both original and bonus shares from the same corporate action in a single lot.

The relevant provision is Section 55(2)(aa): the cost of bonus shares issued after April 1, 2001 is NIL for capital gains purposes. This is correct. BUT when you sold all shares together as one lot on the same day, the correct approach is to compute the AGGREGATE gain: total sale consideration minus cost of the original shares (bonus shares contribute zero cost, which is already factored in). The broker should not have calculated the bonus tranche as a separate transaction with an inflated deemed gain.

Practical steps:

1. Write to the broker formally (email with subject referencing your account and transaction) disputing the TDS calculation. Request a corrected Form 16A or TDS certificate showing actual gain of Rs 2,884.

2. Even if the broker does not revise, file ITR-2 for AY 2026-27 declaring actual capital gains of Rs 2,884 and claim the excess TDS as a refund in Schedule TDS. The income tax department processes this through the return.

3. For future large NRI transactions, apply for a Lower Deduction Certificate under Form 13 before the transaction. This instructs the broker to deduct TDS at the actual liability rate instead of the presumptive rate.

The broker error does not change your actual tax liability. The ITR-2 filing is how you get the excess back.

This [capital gains tax guide for AY 2026-27](https://taxgarden.in/blog/capital-gains-tax-india-ltcg-stcg-ay-2026-27) covers the ITR-2 Schedule CG reporting steps for capital gains including bonus share scenarios.