NRI equity TDS is significantly different from how it works for resident Indians:

Rahul is based in the USA. He sold listed Indian shares in March 2026 — purchased 18 months earlier.

Actual Tax Calculation

TDS Deducted by Broker

DTAA Consideration for Rahul (USA)

A common question: can Rahul use the India-USA DTAA to reduce Indian tax on these gains? For Indian-listed equity shares — India has the primary taxing right as the source country. The India-USA DTAA does not eliminate India’s right to tax Indian equity gains. DTAA benefit for Rahul is relevant in the USA — he can claim Foreign Tax Credit for the ₹1.52L Indian tax against his US tax liability on the same gain (since US taxes worldwide income). The DTAA is not a tool to avoid Indian tax — it is a tool to avoid paying tax in both countries.

This is the most commonly misunderstood aspect of NRI share taxation. Many NRIs believe they can use DTAA to reduce or eliminate Indian tax on their Indian equity gains. This is generally incorrect for listed Indian equity.

1. 1Download Annual Capital Gains Statement from Broker
   Every broker (Zerodha, HDFC Securities, ICICI Direct, Kotak Securities etc.) provides a consolidated P&L and capital gains statement for the financial year. Download this before filing — it is the source of accurate cost basis, sale price, and holding period for every transaction.
2. 2Download AIS and Verify Against Broker Statement
   Income Tax Portal → AIS tab → Capital Gains section. The AIS shows all equity transactions reported by your broker to the Income Tax Department. Verify every transaction in AIS matches your broker statement. Mismatches trigger notices — resolve before filing. If an entry in AIS is wrong — submit feedback on the AIS portal marking it as incorrect or duplicate.
3. 3Pre-Validate NRO Bank Account on IT Portal
   My Account → Profile → Bank Account → Add/Pre-validate. Enter NRO account number, IFSC, and account type. Without pre-validation — refund processing is blocked. Do this before filing, not after, to avoid delays.
4. 4File ITR-2 (or ITR-3 if business income)
   NRIs with capital gains must file ITR-2. If business or professional income also exists — ITR-3. ITR-1 cannot be used for capital gains. In Schedule CG — enter each transaction: asset type, purchase date, sale date, cost, sale price, and computed gain.
5. 5Apply ₹1.25L LTCG Exemption in Schedule CG
   The portal computes this automatically once LTCG transactions are entered — but verify the exemption is being applied. If multiple brokers — aggregate all LTCG before applying the exemption (₹1.25L is an annual limit, not per broker).
6. 6Claim TDS Credit in Schedule TDS
   TDS shown in AIS automatically pre-fills in Schedule TDS. Verify the TDS amount matches broker’s Form 16A. If AIS shows less TDS than Form 16A — contact broker for correction before filing.
7. 7File Before August 31 (Budget 2026 Deadline)
   Capital loss carry-forward requires filing by the original due date. For NRI non-audit cases — August 31 (Budget 2026 extension from July 31). Belated filing after August 31 loses capital loss carry-forward permanently.

The ₹1.25 lakh annual LTCG exemption resets every financial year. Many NRIs let this go unused — they either do not have LTCG that year or do not realise the exemption does not accumulate across years. A systematic annual harvesting strategy uses this exemption every year:

How it works: Each March (before financial year end) — identify equity holdings with unrealised long-term gains. Sell enough units/shares to realise ₹1.25 lakh in LTCG — zero tax on these gains due to exemption. Immediately repurchase at the new (higher) cost basis. Net result: no tax paid, but cost basis is stepped up, reducing future gains.

Mistake 1 — Not filing ITR because “broker already deducted TDS”: The broker deducts 20% TDS — without applying the ₹1.25L exemption and at rates that are almost always higher than actual liability. The only way to recover the excess TDS is through ITR filing. An NRI with ₹13L LTCG has ₹1.17L refundable — but only if ITR is filed. Every year without filing is a year of unclaimed refund.

Mistake 2 — Using old STCG rate of 15% or applying slab rate to listed equity: Budget July 2024 changed equity STCG from 15% to 20% flat. Some NRIs — and occasionally CAs handling limited NRI work — still use 15% or apply income slab rates to equity STCG. Both are wrong from July 23, 2024 onwards. Verify your calculations use 20% for STCG on listed equity and equity MF.

Mistake 3 — Thinking DTAA can eliminate Indian tax on Indian equity gains: DTAA with countries like the USA, UK, Canada does not eliminate India’s right to tax Indian-source capital gains. India is the source country — it taxes the gain. DTAA benefit manifests in the residence country (Foreign Tax Credit). Attempting to claim DTAA as a basis for not paying Indian capital gains tax creates wrong ITR filings and eventual notices.

Mistake 4 — Not declaring capital losses because “there is no tax payable”: Losses also need to be declared in Schedule CG — even if there is no current-year tax. Undeclared losses cannot be carried forward. A ₹3L capital loss this year could offset ₹3L gain next year — saving ₹37,500 in tax. But only if declared in the current year’s ITR filed on time.

Mistake 5 — Not verifying AIS before filing: AIS data from the broker populates in the ITR. If the AIS shows incorrect transaction data (wrong cost basis, wrong sale price, duplicate entries) — the ITR based on AIS will be wrong. Always download and verify AIS against your own broker statement before filing. Raise AIS feedback for any incorrect entries.

Mistake 6 — NRO account not pre-validated on IT portal: The refund goes to the bank account linked on the Income Tax portal. For NRIs — this must be a pre-validated NRO account. Without pre-validation, the refund is generated but cannot be credited — it sits in a limbo state requiring multiple follow-ups. Pre-validate in April, before any ITR is filed. Takes five minutes: My Account → Profile → Bank Account on incometax.gov.in.