The dividend income as well as the capital gains earned by your son from shares listed in India and equity oriented schemes of mutual funds are subject to tax in India. Like a resident tax payer, a non-resident is also entitled to the basic exemption limit. In case income other than long term capital gains of any nature and short term capital gains on equity shares/equity mutual funds is less than the amount of basic exemption, a resident is entitled to set off such short fall against any long term capital gains and short term capital gains on equity products. The same facility to set off the short fall in basic exemption limit is not available to a non-resident. So he has to pay full tax on these capital gains even if he does not have any other income or such other income is below the taxable limits. A non resident has to pay tax at the rate of 20% and applicable surcharge and cess on his dividend income. The liability to tax on dividends will arise only if his aggregate income excluding the capital gains stated above exceeds the amount of basic exemption limit.