Bahrain NRIs · Dividend Tax

Dividend tax on Indian shares for NRIs in Bahrain

Indian companies withhold 20% before a dividend reaches you in Bahrain, and no treaty rate exists to cut it. Here's what's actually left to claim.

When an Indian company pays you a dividend while you live in Bahrain, it withholds 20% under Section 393(2) (Section 195 until 31 March 2026), plus surcharge and cess, before the money leaves India. India and Bahrain have no tax treaty. The 2012 agreement between them is a Tax Information Exchange Agreement, which lets the two tax offices share information but caps no withholding rate. That makes the Form 41 and Tax Residency Certificate routine brokers ask overseas investors for pointless here: those documents unlock a treaty rate, and there isn't one for Bahrain NRIs. Section 115A then fixes a non-resident's Indian tax on dividends at that same 20% of the gross amount with no expenses allowed, so the withholding is usually the final Indian tax rather than an advance you reclaim later. And because the dividend isn't taxed in Bahrain either, there's no credit at home to soften the Indian tax.

Request a free CA call

India-Bahrain key facts: dividend tax

India's default non-resident rate of 20% applies here with nothing to claim it down to.

Section 115A makes the 20% final, so check the surcharge and cess. No certificate is needed on either side: there is no treaty rate to claim in India, and nothing is charged on this income in Bahrain.

This is India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026). There is no India-Bahrain treaty to modify it. Surcharge and cess apply on top where relevant.

How it works on the India side

Since the 2020 shift back to classical dividend taxation, dividends from Indian companies are taxable in the shareholder's hands and the company deducts TDS before paying. For a non-resident the default is 20% under Section 393(2) (Section 195 until 31 March 2026), plus surcharge and cess, and Section 115A taxes those dividends at 20% of the gross amount with no expenses allowed. A lower rate only ever comes from a treaty, and only where that treaty writes one for individuals: several of India's treaties reserve the reduced dividend rate for companies holding a large stake in the Indian payer, and some countries have no treaty with India at all, so portfolio investors there stay at the domestic rate.

Where a lower individual rate does apply, you claim it with Form 41 (formerly Form 10F) and a Tax Residency Certificate lodged with the company or broker, and any dividend withheld at the higher rate before your paperwork was on file is reclaimed through your Indian return. Where no lower rate applies, the 20% is generally your final Indian tax, so the questions worth asking are whether the payer withheld more than the correct rate and surcharge, and whether the country you live in gives you a credit for that Indian tax.

What changes because you live in Bahrain

Bahrain takes nothing off this Indian income. There's no personal income tax, no capital gains tax and no net wealth or inheritance tax on individuals, and no foreign tax relief legislation either, so the Indian tax withheld earns you no credit on the Bahrain side. The trap here is paperwork, not tax. Bahrain tells the OECD it issues no tax identification numbers for CRS purposes, so you have no Bahrain TIN to quote. Don't leave the box blank. Indian banks, AMCs and depositories read that field as TIN or functional equivalent, and for Bahrain they accept your Bahrain ID or CPR number, so give it with the issuing country. Skip it and the institution can't treat your self-certification as valid under Rule 240 of the Income-tax Rules 2026, the old Rule 114H, and transactions like an FD renewal or a redemption can sit restricted until you redo the form.

Frequently asked questions

Common questions from Bahrain NRIs

20% under Section 393(2), plus surcharge and cess, and no treaty rate is available to Bahrain NRIs. Section 115A sets a non-resident's Indian tax on dividends at that same 20% on the gross amount, so unlike NRO interest this is normally the end of the story rather than an over-deduction waiting to be refunded.

Not at the Indian end. There's no treaty rate to claim, so Form 41 won't help and the 20% stands. With no local tax on the dividend in Bahrain, there's no credit to claim at home either. What is worth checking is whether the company or its registrar withheld more than 20% plus your correct surcharge and cess, which happens and is recoverable on an Indian return.

Go further

Read the full guide, or see your country's complete picture

NRI ITR for interest, rent and dividend income Bahrain NRI tax guide: every income type and the rates that apply

Dividend Tax sorted, by an Indian CA who works with Bahrain NRIs

Tell us your situation and a practising Chartered Accountant will confirm the rate that applies, the paperwork you need, and what you can reclaim, on a free call with no obligation.