Why 20% was deducted
When an Indian company pays a dividend to a non-resident, it withholds tax under Section 195 at 20%, plus surcharge and cess. That is the default rate the company must apply unless you have given it a reason to apply a lower one.
Your country's tax treaty with India almost always caps the dividend rate below 20%, commonly at 10% or 15% depending on the country and how much of the company you hold. But the company cannot simply assume your treaty applies. It needs proof, and it needs it in time, or it deducts the full 20% to be safe.
The paperwork, and the record-date deadline
To get the treaty rate deducted at source, you give the company or its registrar three things: a Tax Residency Certificate from your country, Form 10F, which becomes Form 41 from FY 2026-27, and a short declaration that you are the beneficial owner of the shares and have no permanent establishment in India.
The catch is timing. Each company fixes a record date for a dividend, and the documents have to reach its registrar on or before that date. The registrars are firms like KFintech and MUFG Intime, formerly Link Intime, and they process the withholding for many companies. Submit late, or to the wrong place, and the system deducts 20%. When the treaty rate is applied, the surcharge and cess are not added on top, so the saving is real.
How to reclaim it if you missed the date
If 20% was already taken, the treaty rate is not lost, it just moves to your return. You file an Indian income-tax return, ITR-2, for that year, report the dividend, apply your treaty rate with the Tax Residency Certificate and Form 10F, and claim the difference between the 20% deducted and the treaty rate as a refund.
This is the same relief, only after the fact, and it comes with interest on the refund. The reason to get the paperwork in before the record date anyway is cash flow: the treaty rate at source means you keep the money now, rather than waiting a year to reclaim it.
A worked example
Priya, an NRI in the UK, holds shares in an Indian company that declares a dividend of five lakh rupees. The registrar deducts 20% plus surcharge and cess, over a lakh, because her Tax Residency Certificate and Form 10F did not reach it before the record date.
Her India-UK treaty caps the dividend at 15%. For the next dividend she sends the registrar her Tax Residency Certificate, Form 10F and the beneficial-ownership declaration well before the record date, so only 15% is deducted. For the dividend already over-taxed, she files her Indian return, applies the 15% treaty rate, and reclaims the difference with interest.