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NRE PIS account: Income tax rules on share transactions explained


I am an NRI and have a PIS (Portfolio Investment Scheme) account with a bank. Is there any provision for TDS on sale transaction of shares for an NRE PIS Account? I understand that the all the income of NRE accounts are exempt. In case TDS is applicable, please let me know the rate of TDS.

Your impression that income of NRI (PIS) is not taxable is not correct. What is exempt for an NRI, is any interest credited to the NRE bank account and not all the incomes which are credited to an NRE account. So income of all the natures except the interest on NRE and FCNR account are taxable in India and the payer of such income is under an obligation to deduct tax at source while remitting or crediting such income to the bank account of an NRI. Since the PIS account is handled by the bank the bank it would know the profits made by you at the time of sale of investment held in your PIS account and deduct tax accordingly. The rate at which the tax would be deducted would depend on the holding period of your investments and the amount which is taxable. Since PIS is applicable for shares to be purchased and sold on recognized stock exchanges in India. Tax @ 15% will be deducted if the shares have been held for less than 12 months. In respect of shares held for 12 months or more the profits would be treated as long term capital gains and the bank would deduct tax at flat rate of 10% on the profits element in the sale proceeds.

Balwant Jain is a tax and investment expert and can be reached on and @jainbalwant on Twitter.

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