Key Takeaways
- NRIs can claim TDS refund on stock buybacks even with late tax return filing
- India-UAE DTAA reduces tax rate from 20% to 10% on buyback proceeds
- Belated returns can be filed until December 31 with applicable late fees
- Capital loss from buyback cannot be carried forward with late filing
NRI Tax Refund: Claiming TDS on Stock Buybacks After Deadline
Non-resident Indians can still claim Tax Deducted at Source (TDS) refunds on stock buybacks even after missing the original tax filing deadline, according to tax experts. While late filing comes with financial penalties and some limitations, the core refund opportunity remains available until December 31.
Understanding Buyback Taxation for NRIs
Recent amendments under the Finance (No. 2) Act, 2024 now treat buyback amounts as dividend income for shareholders. For non-resident investors, this typically attracts a 20% tax rate plus applicable surcharge and cess under domestic law.
However, the India-UAE Double Taxation Avoidance Agreement (DTAA) provides significant relief. Under Article 10 of the treaty, buyback proceeds qualify as dividend income with a concessional tax rate of just 10%.
How to Claim Your TDS Refund
If your company deducted TDS at the higher domestic rate of 20%, you can file a belated income tax return to claim treaty benefits and seek refund of the excess tax deducted. The process requires specific documentation including:
- Tax Residency Certificate (TRC)
- Form 10F for treaty benefits
Belated returns must be filed by December 31 with late fees ranging from ₹1,000 to ₹5,000 depending on your total income.
Important Limitations to Consider
While TDS refunds remain accessible, late filing comes with one significant drawback: the inability to carry forward capital losses. Under the new rules, the cost of acquiring shares in buyback transactions is treated as capital loss.
“Such capital loss can be set off against other capital gains in the same financial year or carried forward for up to eight subsequent years, provided the return is filed by the original due date,” explains Harshal Bhuta, partner at P. R. Bhuta & Co. CAs.
For NRIs who missed the July deadline, this means any capital loss from the buyback cannot be carried forward unless there are capital gains available for adjustment in the same financial year.
