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My son is residing in an African country. He is a non-resident Indian (NRI) having a non-resident external (NRE) account in India. He invests in fixed deposits, equity and earns dividends on shares. I would like to know if earning dividends are taxable in India. As far as I know, interest income for NRIs are not taxable, but I have no idea if dividends on shares and profit on equity are taxable and if an NRI is eligible for exemption limit of 2.5 lakh like Indian residents.

—T.M. Karia

Dividend income from equity shares of an Indian company is taxable in India effective FY22. For an NRI, dividend income shall be taxable at 20% (additional cess and surcharge as applicable). This tax will be deducted as TDS before the dividend is paid to your bank account. You can cross check the TDS deducted from your Form 26AS. For a taxpayer resident in India, dividend income is taxable as per the rates applicable to his/her total income. NRIs are eligible to claim the basic exemption limit of 2.5 lakh. Do remember to sum up income from all sources before applying the basic exemption limit.

In case such dividend income is taxable in the country of your residence, you may refer to the double tax avoidance agreement between the country of residence and India so that you don’t have to pay tax on the same income twice.

The Central Board of Direct Taxes has announced that all PAN cards that are not linked to Aadhaar by 30 June will be declared as “inoperative". Does this apply to NRI PAN cards?

—A. Venkat

Please note that the deadline to link PAN with Aadhaar has now been extended till 30 September. If you are an NRI and hold an Aadhaar card, it is mandatory that you link it with your PAN card.

Archit Gupta is founderand chief executive officer, ClearTax.

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