With Holding Tax

In many cases the income earned specially by non-residents is subject to withholding tax provisions commonly called as provisions for Tax Deducted at Source (TDS). As regards TDS is concerned, the position is that the non-resident seller can repatriate immediately the funds to the extent of the cost of acquisition of investment sold or the actual amount of sale proceeds realised, whichever is less, without production of a tax clearance certificate from the Indian tax authorities. In cases of long term capital gains, where the disignated bank under Sec.204 of the Income Tax Act, deducts tax @ 20% from long term capital gains in respect of foreign exchange assets, the balance that the entire cost plus 80% of long term capital gains can be remitted to the non-resident Indian or credited to his NRE/FCNR account. The facility of repatriation of sale proceeds will be available only if the investment is reiterated by the non-resident holding for a period of at least one year for shares or in other securities listed in a recognised Stock Exchange in India or a unit of Unit Trust of India or a unit of Mutual Funds specified under Sec.10(23D) and three years for other assets from the date of registration of the holding in his name or in the name of designated bank or the latter’s name.

As regards short term capital gains, the bank would not credit the sale proceeds to NRE account or would not remit the funds abroad and would insist on payment of tax which the non-resident would be sold, advised to pay in the form of advance tax.

For royalty and fee for technical services derived in India also, there are TDS provisions that by and large are the same as the rates of tax for such category of income.