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 20% 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 20% + 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?

Example scenario

1. Shares worth ₹15,844.77 were sold, and Zerodha blocks (provisional TDS) ₹3,790.07 were retained as provisional TDS (about 23.92%) at the end of the day.
2. On the next day, this TDS is released.
3. If there is a profit, the actual TDS is deducted after releasing the blocked TDS amount.
4. If the shares are sold and there is a loss, 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 ₹1,25,000, an LTCG of 12.50% 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 filing tax returns. For tax-specific queries, contact a tax consultant or Chartered Accountant (CA).

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 12.50%, and STCG is 20% before 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?