Why do I see 'Provisional TDS amount blocked' in my ledger?
This is a debit transaction that you might see in your ledger if you only have a Non-Resident Indian (NRI) account with us.
If you have opened an NRI trading account through the Non-PIS route, the broker is responsible to deduct the TDS (Tax Deducted at Source). When you trade in the stock markets, there is a capital gains tax (Long-term & Short-term) that is deducted in line with the regulations. Here is how the Capital Gains Tax works with respect to NRO accounts:
1. Long-term Capital Gains (LTCG) : A tax of 10% on profits above Rs.1 lakh is applicable, provided the stock is held for more than 365 days. Brokers cannot provide an exemption here considering the fact that the NRI can have multiple capital gains (Mutual funds, other broking accounts, etc), and hence 10% is deducted.
If you don't accrue any LTCG, TDS can be claimed when you file returns. Please reach out to a Chartered Accountant/Tax consultant for any tax-specific queries. You can file your return and claim the excess TDS (if any).
2. Short-term Capital Gains (STCG) : A tax of 15% on profits made on stocks sold within 365 days is applicable.
When you sell shares from a Non-PIS account, we post a Provisional TDS entry on your ledger at the end of the day at 15% + cess (applicable on the amount you have received from selling the shares). At the end of the next working day (T+1), we reverse this Provisional TDS and debit the actual TDS if there is a capital gain from the sale of your shares.
Here is a screenshot of the ledger shown as an example to understand this better.
- When you sell shares worth Rs.21,104.46, we block (provisional TDS) Rs.3790.07 (about 17.94%) at the end of the day.
- On the next day, this TDS will be released.
- If there is a profit here, we deduct the actual TDS right after releasing the blocked TDS amount.
- If there is a loss when you sell the shares, there won’t be any TDS deducted.
The rate of LTCG is 11.96%, and STCG is 17.94% after the surcharge and cess are levied.
If you have transferred shares from another broker, kindly ensure that you 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.