About Nidhi Company

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Computation of Interests

The deductor or the payer should deduct TDS if the amount of interest paid during the previous year exceeds INR 40,000 for banks and INR 5,000 in other cases. 

Interest Accrued

The deductor is required to pay TDS when the interest is accrued if the deposit is for more than a year and the interest is compounded. This is applicable regardless of whether the same is paid or not.

Rates for TDS

The following rates of taxes will be applicable as required:

• 10% as TDS will be applicable when PAN is furnished.

• 20% as TDS will be applicable when PAN is not furnished.

• The amount of surcharge, Education Cess and SHEC will not be added to the above rates. Hence, taxes will be deducted at source at the basic rate.

Depositing TDS

The following is the time limit in which TDS must be deposited:

• Tax deducted during any months between April to February is required to be deposited on or before the 7th of the immediate month.

• Taxes deducted in the month of March is required to be deposited on or before the 30th of April.

Who should deduct tax under Section 195?

Any person who makes any payment (other than salary or interest referred to in sections 194LB, 194LC and 194LD) taxable in India to a non-resident must deduct tax under this section. 

The payer, one who pays the NRI or remits the payment, can be a resident or a non-resident, an individual, Hindu Undivided Families (HUFs), partnership firms, other NRIs, foreign companies, or an artificial juridical person (for example, a corporation, government agency or non-profit organisation).

Is there a threshold limit to deduct TDS u/s 195?

No, there is no threshold limit to deduct TDS under Section 195. However, the payer must deduct tax only when the payment made to a non-resident is taxable in India. Therefore, no tax is to be deducted in case of exempt income or any other income that is not taxable as per the Income Tax Act unless the government notifies explicitly.
 

At what rate is the tax deducted under section 195?

TDS is deducted at either of the following rates, whichever is more beneficial to the payee:

· Rates as per the Finance Act of the given year

· Rates contained in the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of such non-resident

Note that the rates given under the Finance Act are to be increased by the applicable surcharge and education cess of 4%. However, surcharge and cess are not required to be added to the rates given under DTAA.

Particulars

Rates Income from the investment made by an NRI ( Interest/Dividend )

- 20%