Can I claim TDS refund despite late return filing?

I am an NRI living in Dubai and have investments in Indian listed stocks. One of the companies I invested in did a buyback in March, on which Tax Deducted at Source (TDS) was deducted. At that time, I was advised by a friend that I could claim a refund of TDS at the time of filing my return due to the benefits of the Double Taxation Avoidance Agreement (DTAA). However, I missed the July filing deadline due to a personal emergency. I would like to file my belated tax return now. Can I claim this TDS refund now?
- Name withheld on request

The entire amount paid by an Indian company for the buyback of its shares is now considered a dividend in the hands of shareholders, according to the amendments introduced by the Finance (No. 2) Act, 2024. For non-resident investors, both TDS and final tax are levied at a rate of 20% (plus applicable surcharge and cess) under the Income Tax Act, 1961. However, this tax rate may be reduced under the India–UAE Double Taxation Avoidance Agreement, as buyback proceeds qualify as dividend income under Article 10 of the treaty, which prescribes a concessional rate of 10%. To avail of such treaty relief, the taxpayer must comply with the documentation requirements, including furnishing a Tax Residency Certificate (TRC) and Form 10F.

From your query, it appears that the company has deducted TDS at the domestic rate of 20% (plus surcharge and cess), and you now wish to claim treaty benefits. Even though the original tax return has not been filed, you may still file a belated income-tax return, claiming the DTAA benefit and seeking a refund of the excess TDS deducted. A belated return can be filed on or before 31 December, along with a late filing fee of ₹5,000 for total income exceeding ₹5 lakh, and ₹1,000 where total income is below that threshold.

It is important to note that, following the amendment, the cost of acquiring the shares is now treated as a capital loss, while the sale consideration is deemed to be nil. Such capital loss can be set off against other capital gains in the same financial year or carried forward for up to the subsequent eight financial years, provided the return of income is filed within the original due date. In your case, unless there are capital gains available for adjustment of the capital loss in the same year, the carry-forward of capital loss arising from the buyback transaction will not be permissible since the return has not been filed by you within the original due date.

Harshal Bhuta is partner at P. R. Bhuta & Co. CAs