What is the “Provisional TDS amount blocked” entry in the ledger?
If a Non-PIS account is opened, Zerodha is responsible for deducting Tax Deducted at Source (TDS). When trading in the stock markets, long-term and short-term capital gains are applicable. For NRO accounts, they are as follows:
Short-term Capital Gains (STCG)
STCG of 15% on profits made is applicable on stocks sold within 365 days.
When shares are sold from a Non-PIS account, Zerodha posts a provisional TDS entry on the ledger at the end of the day at 15% + cess (applicable on the amount received from the shares sold). At the end of the next working day (T+1), the provisional TDS is reversed, and the actual TDS is debited if there is a capital gain from the sale of shares. To learn how to read the ledger, see How to interpret the ledger statement for an NRI Zerodha account?
- Shares worth ₹21,104.46 are sold, Zerodha blocks (provisional TDS) ₹3790.07 as provisional TDS (about 17.94%) at the end of the day.
- On the next day, this TDS is released.
- If there is a profit, the actual TDS is deducted after releasing the blocked TDS amount.
- If there is a loss when the shares are sold, TDS will not be deducted. The losses will be carried forward and set-off against future profits.
Long-term Capital Gains (LTCG)
On profits above ₹1,00,000, an LTCG of 10% is applicable if the shares are held for more than 365 days. Brokers cannot provide an exemption as NRIs can have multiple capital gains through mutual funds, accounts with other brokers etc.
If an NRI does not accrue any LTCG, TDS can be claimed while filling tax returns. Contact a tax consultant or Chartered Accountant (CA) for tax-specific queries.
If shares are transferred from another broker, update the buy prices for the transferred stocks before selling them. If buy prices are not updated, the TDS will be deducted from the amount received from the sale of shares.
Did you know?
- The rate of LTCG is 11.96%, and STCG is 17.94% after the surcharge and cess are levied.
- The Income Tax Department (ITD) has inactivated PANs that are not linked to Aadhaar from July 1st 2023. PANs of NRIs and Persons of Indian Origin (PIO) were exempted but have now been deactivated as the status was not updated as NRI. As per the circular (WEB), a higher TDS is applicable if the residential status is not updated with the ITD. To learn how to update the residential status, see How to update the resident status of PAN for an NRI & PIO account?