Bahrain has no India DTAA. The recovery path is different here.

If you've read elsewhere that India and Bahrain have a DTAA capping interest at 10%, including earlier versions of THIS page. That is wrong. The 2012 India-Bahrain agreement is a Tax Information Exchange Agreement (TIEA), signed 31 May 2012 and in force from 11 April 2013. A TIEA lets the two governments share taxpayer information; it does NOT allocate taxing rights or reduce withholding tax rates. There is no Article 10, no Article 11, no treaty cap.

We're correcting this directly because Bahrain NRIs reading the wrong thing might file Form 10F / Form 41 expecting a 10% interest rate that legally doesn't exist, and then be unable to understand why their bank kept deducting at 30%. The bank is right; there is no treaty rate to apply.

This post replaces the earlier incorrect version. The recovery angle for Bahrain NRIs is different, and still real, just not the treaty route.

Three operational consequences for a Bahrain-resident Indian:

1) Default Section 195 TDS applies in full. NRO interest is withheld at 30% (plus surcharge / cess). Indian dividends to non-residents are withheld at 20%. There is no treaty rate to claim down to.

2) Form 10F / Form 41 has no role for Bahrain. Form 41 (and Form 10F before April 2026) is the self-declaration tax-residents file to claim DTAA benefits. Without a DTAA, the form has nothing to claim. NBR can issue residency confirmations, but Indian banks correctly will not honour them as a basis to reduce TDS. There's no underlying treaty entitlement.

3) Section 90 / Section 159 (the Income-tax Act 2025 successor) doesn't help. Both sections operate by reference to a notified DTAA. India has notified zero treaties with Bahrain.

Section 395, formerly Section 197 lets any non-resident apply to the Indian Assessing Officer for a 'lower or nil' TDS certificate where the actual tax liability is lower than the default Section 195 rate. The application form is Form 13.

Section 395, formerly Section 197 is not a treaty. It's a domestic Indian provision and works for Bahrain NRIs exactly the same as for any other non-resident. The most common Bahrain use case: selling Indian property. Default Section 195 buyer-deduction is 12.5% LTCG plus surcharge plus cess (effective 13.0% / 14.30% / 14.95% based on sale value bands) on the FULL sale value. With a Form 13 certificate, the buyer deducts only on your actual computed gain, typically a fraction of the gross sale price.

For a ₹2.5 Cr Bandra flat sale where the actual gain is ₹40L: Default TDS = ₹2.5 Cr × 14.95% = ₹37.4L. Section 197 certified TDS = ₹40L × 12.5% × 1.04 = ₹5.2L. Liquidity unlocked at the closing table: ₹32.2L. AO turnaround: 30-45 days from a clean Form 13 filing.

If a Bahrain NRI's TOTAL Indian-source income for a past year was below the applicable basic exemption limit, the bank's 30% TDS was effectively fully refundable, not because of a treaty, but because there was no actual tax liability against which to apply the TDS.

The basic exemption limit moved over the period:

Section 119(2)(b) lets you file a condonation application for past returns up to 5 years from the end of the relevant Assessment Year, per CBDT Circular 11/2024 (effective for applications filed on or after 1 October 2024). For someone in FY 2026-27, the practical reach is roughly AY 2022-23 onwards (FY 2021-22 onwards). Older years are time-barred.

A Bahrain NRI with one ₹15L NRO FD earning 7% (₹1.05L of annual interest) and no other Indian income sits below every regime's basic exemption. Section 195 TDS at 30% = ₹31,500/yr taken by the bank. Refundable in full via ITR + condonation. Section 244A adds ~6% p.a. simple interest on the delayed refund.

Section 9(1)(v) defines when interest is 'deemed to accrue' in India. The general rule is: interest paid by an Indian resident or by a non-resident in respect of a debt incurred for an Indian business is Indian-source.

But Section 9(1)(v) has carve-outs. Interest on certain notified Government bonds, certain RBI-issued instruments, and certain specified savings schemes for non-residents may fall outside the source rule entirely. These are narrow technical paths. Most NRO interest does NOT qualify, but if your Indian holdings include specified bonds (e.g. tax-free PSU bonds issued under Section 10(15)) or sovereign gold bonds, the Section 9 source treatment matters.

This is one of the few areas where a Bahrain NRI can legitimately reduce Indian TDS exposure without a treaty: by holding instruments where the underlying interest is statutorily exempt under Section 10 rather than reduced under a DTAA.

Upload your AIS. We read every TDS entry against your country's actual treaty position, and where the treaty position is 'no treaty', we route the recovery through Section 197 / 119(2)(b) / Section 10 paths instead. No treaty rate is asserted that doesn't exist.

If you engage us, a Gulf-specialist CA files current-year ITR (claiming refund where Indian income was below basic exemption), files Section 119(2)(b) condonation for past years where over-withheld TDS is recoverable, and files Form 13 in advance of any property sale or large transaction. We handle the AO correspondence under Section 288 Authorized Representative so you don't fly to Manama-Mumbai for a CIT(A) hearing. Fee is success-fee based on recovery, paid only after the refund credits your NRO. No recovery, no fee. Exact percentage quoted on the call.

Book a free CA appointment if you'd rather talk first. 15 minutes. No card. The 15-minute call typically catches at least one Section 197 or condonation opportunity that Manama-side advisors have missed because they were trying to apply a treaty that doesn't exist.

Q: My local advisor in Manama keeps saying there's a 10% rate. Are they wrong?

A: Yes. The Indian Income Tax Department's official DTAA list does not include Bahrain. The 2012 India-Bahrain agreement is at incometaxindia.gov.in/DTAA/Bahrain.html and is explicitly titled a Tax Information Exchange Agreement. Show your advisor the page.

Q: I have both NRE and NRO accounts. Does the no-DTAA position affect both?

A: NRE interest is tax-free in India under Section 10(4)(ii), completely separate from any treaty. That exemption is intact regardless of DTAA status. The no-treaty issue affects only NRO interest, dividends, and other Indian-source income subject to Section 195 default rates.

Q: I sold my Bangalore flat last year and the buyer deducted 14.95%. Can I recover anything?

A: Yes, file your Indian ITR-2 with the actual capital gain computation. The 14.95% was withheld on the full sale price; your ITR claims back the difference between (sale × 14.95%) and (gain × 12.5% × 1.04). For most genuine NRI sales, that gap is significant. The recovery is via ITR refund, not a DTAA claim.

Q: Can I structure my Indian holdings to avoid the no-DTAA hit?

A: Within reason, yes. Sovereign gold bonds, certain Section 10(15) tax-free PSU bonds, and NRE-channel deposits (if your underlying funds are foreign-sourced) all reduce your Section 195 exposure. We routinely advise on this in the free 15-minute call.

Q: Will India and Bahrain ever sign a full DTAA?

A: Negotiations have been discussed periodically since 2014 but no formal treaty text has been published as of FY 2026-27. We'll update this page if a comprehensive treaty is signed. Until then, the recovery toolkit is Section 197, Section 119(2)(b), and Section 10 carve-outs, not a treaty rate.