Malaysia NRIs · Dividend Tax

Dividend tax on Indian shares for NRIs in Malaysia

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

When an Indian company pays you a dividend while you live in Malaysia, 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-Malaysia treaty position is more favourable, capping the rate at 5% 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-Malaysia key facts: dividend tax

Default non-resident TDS rate	20%
India-Malaysia DTAA treaty rate	5%
Your saving via the treaty	15%
Treaty article / basis	Article 10: 5% on Indian-listed dividends, the lowest dividend rate of any major Indian DTAA alongside Hong Kong
Your TRC issuing authority	LHDN (Inland Revenue Board)

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

Malaysia won't tax this a second time. As a resident individual you're exempt on foreign income you bring into Malaysia, and P.U.(A) 451/2024 pushed that exemption from the end of 2026 out to 31 December 2036. The condition is that the income was taxed where it arose, and the Indian tax deducted at source satisfies it. LHDN also accepts the test as met where India charged nothing because the income sat below a threshold, and foreign capital gains sit outside the Malaysian net for individuals anyway. Then comes the trap. Your Malaysian tax on all of this is nil, and Schedule 7 caps any foreign tax credit at the Malaysian tax on that same income. So Indian tax on your interest, dividends, rent, equity gains and property gains earns you nothing back in Malaysia. Keep every Indian deduction certificate, because LHDN can ask you to prove the income was taxed in India.

Frequently asked questions

Common questions from Malaysian NRIs

India's default is 20% under Section 393(2), but the India-Malaysia treaty caps it at 5% for individual residents, a saving of 15%. To get the lower rate you file Form 41 with a Tax Residency Certificate from LHDN (Inland Revenue Board). 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 5% applies instead of the 20% default, a 15% reduction. Dividends withheld at the higher rate before your paperwork was lodged are reclaimed when you file your Indian return.

Go further

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

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

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

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