Luxembourg NRIs · Dividend Tax

Dividend tax on Indian shares for NRIs in Luxembourg

Dividends from Indian companies are withheld at the non-resident rate before they reach you in Luxembourg. Here's the treaty position and how to reclaim any excess.

When an Indian company pays you a dividend while you live in Luxembourg, the company withholds tax at source before the money reaches you. India's default withholding on non-resident dividends is 20% under Section 393(2), the successor to Section 195. The India-Luxembourg treaty position is more favourable, capping the rate at 10% for individual residents, a real saving over the 20% default (Article 10). To claim it you need Form 41, the successor to Form 10F, and a Tax Residency Certificate on file with the company or your broker.

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India-Luxembourg key facts: dividend tax

Default non-resident TDS rate	20%
India-Luxembourg DTAA treaty rate	10%
Your saving via the treaty	10%
Treaty article / basis	Article 10: flat 10% treaty cap, irrespective of shareholding size
Your TRC issuing authority	the Administration des contributions directes (ACD)

Rates reflect India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026) and the India-Luxembourg treaty. 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 Luxembourg

Luxembourg has a cheap way to settle interest and your Indian interest can't use it. Residents pay a flat 20% liberatory withholding, the relibi, on bank interest, and that interest then stays outside your tax base altogether. You can stretch the 20% to a foreign bank on form 931, but only to one in the EU or the EEA. An Indian bank is neither, so your NRO and FD interest lands on the form 100 and climbs the ordinary scale, which reaches 45.78% once the employment fund surcharge goes on, plus 1.4% for long-term care. Sitting inside the base, it also lifts the rate on everything else you declare. Indian shares run the other way: sell after six months, with a stake that never topped 10% in the five years before, and Luxembourg doesn't tax the gain at all, so nothing here absorbs the Indian tax you already paid.

Frequently asked questions

Common questions from Luxembourg NRIs

India's default is 20% under Section 393(2), but the India-Luxembourg treaty caps it at 10% for individual residents, a saving of 10%. To get the lower rate you file Form 41 with a Tax Residency Certificate from the Administration des contributions directes (ACD). Any excess withheld beforehand is reclaimed on your Indian return.

Yes. With Form 41 and a Tax Residency Certificate on file, the treaty rate of 10% applies instead of the 20% default, a 10% reduction. Dividends withheld at the higher rate before your paperwork was lodged are reclaimed when you file your Indian return.

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

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