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How to avoid the 30% TDS on your NRO account interest

Every NRI gets the same shock: the bank slices 30% off the interest credited to their NRO account. It's not a penalty, just the default the law sets for non-residents. Your treaty rate is far lower, and getting it back is a well-worn path that most NRIs never walk.

Last reviewed: 4 July 20267 min readBy Vipul Sharma, Founder · reviewed by Preetesh Maloo, CA

For UAE NRI

Default Indian TDS 30% · your treaty rate 12.5%. We get the lower rate applied and recover the gap.

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Key takeaways

  • Your bank cuts 30% (plus cess) on NRO interest by default; your treaty rate is usually 10-15%.
  • Claim it back with Form 10F (Form 41 from 2026), a TRC, and your ITR-2. The refund carries 6% interest.
  • You can still claim up to five past years through a condonation request (CBDT Circular 11/2024).
  • NRE and FCNR interest are fully tax-free. NRO is the only account with this TDS.

The math, in one example

You have ₹10 lakh of NRO interest in a year, and you live in the UAE.

Default TDS at 30%₹3,00,000
At the UAE treaty rate of 12.5%₹1,25,000
You get back, every year₹1,75,000

How much TDS is deducted on an NRO account, and what it should be

The day your NRO account earns interest, the bank slices 30% off the top, a bit more once you add cess. It isn't a penalty. The law (Section 195) makes the bank withhold at the top non-resident rate, because it has no way to know which country you live in or which treaty you qualify for.

Your treaty rate is far lower. India's tax treaties cap the tax on NRO interest, usually between 10% and 15%.

Where you liveYour treaty rate on interest
UAE12.5%
US, UK, Singapore15%
Saudi Arabia, Qatar, Netherlands, Germany, France10%

Here's the money in it. The gap between the two rates is what you get back, every year. On a big deposit, or across several years, it runs into lakhs.

How to fix it: two forms and a return

Getting your treaty rate back takes three things.

Form 10F (Form 41 from April 2026). A short online self-declaration on the Indian tax portal that says you're a non-resident claiming a treaty rate. You file it once a year.

A Tax Residency Certificate (TRC) from your country's tax office, proving you live there for tax. It has to cover the Indian year you're claiming. Getting one is its own country-by-country process, which we cover in a separate guide.

Your Indian tax return (ITR-2). This is where the refund actually happens. You declare the interest and the tax the bank took, work out the tax at your treaty rate, and claim back the difference.

The refund lands in your NRO account, usually in four to eight months, with 6% interest on top (Section 244A), running from the start of the assessment year until it's paid. That interest is automatic, not something you have to ask for.

Tip

You never have to be in India for any of this. The TRC comes from your own country, and Form 10F or 41 and your return are all filed online.

Missed past years? You can still claim

Most NRIs don't run this for the first few years. They see the 30%, assume that's just how it works, and let it go. The good news: you can go back and claim.

Under Section 119(2)(b), the tax department can allow late refund claims for genuine hardship, and a 2024 CBDT circular extends this to NRI treaty refunds for up to five past years.

The steps: file a condonation request (which asks permission to file the late returns), wait for the order (usually two to four months), then file the return for each approved year with your TRC and Form 10F for that year. Each year's refund comes back separately, with the 6% interest.

A typical three-year claim brings back ₹40,000 to ₹3 lakh, sometimes much more, plus the interest.

NRE and FCNR aren't taxed at all

This whole problem is unique to NRO. Two of your other accounts are completely tax-free.

NRE interest is exempt (Section 10(4)(ii)). The bank deducts no tax and doesn't even report it.

FCNR interest is exempt too (Section 10(15)(iv)(fa)). Same idea, but the deposit is held in foreign currency.

NRO is the odd one out because it holds your India-earned money, like rent, dividends or pension, which India taxes at source.

So if you have foreign-currency savings you can route into an NRE deposit instead of NRO, do it. The entire 30% problem disappears.

Can you do this yourself?

Do it yourself

  • Get a Tax Residency Certificate (TRC) from your country's tax authority, which proves where you are resident
  • Self-declare Form 41 (the renamed Form 10F) on the Indian income-tax portal. It is a self-declaration, so no CA signature is needed
  • Check your 26AS and AIS on the portal to see exactly how much TDS the bank has already deducted
  • Give the TRC and Form 41 (formerly Form 10F) to your bank's NRI desk so future interest is deducted at your treaty rate, not the full 30%

Where you need a CA

  • Claim back the excess already deducted by filing your ITR-2 with DTAA relief. the non-resident return with treaty relief and the refund computation is where a wrong entry triggers a notice.
  • Apply for a Section 197 lower-deduction certificate when the interest is large. Section 395, formerly Section 197 is a formal application a CA prepares, justifies and tracks with the assessing officer.
  • Reopen time-barred past years through a Section 119(2)(b) condonation request. the condonation petition has to be drafted and filed by a professional.
  • Respond if the department questions your treaty claim. a CA can represent you before the officer under Section 288, so you never have to travel to India.

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Country-by-country tax-after-DTAA

Your effective rate depends on where you live

Same product, 31 different post-treaty outcomes. Sorted by lowest effective Indian tax first. Source: India's notified DTAAs and CBDT TDS rate chart, cross-checked country-by-country.

CountryDefault TDSTreaty rateSaving
Mauritius30%7.5%22.5%
Oman30%10%20%
Saudi Arabia30%10%20%
Qatar30%10%20%
Germany30%10%20%
Netherlands30%10%20%
Kuwait30%10%20%
France30%10%20%
Ireland30%10%20%
Switzerland30%10%20%
Malaysia30%10%20%
Japan30%10%20%
South Korea30%10%20%
Hong Kong30%10%20%
New Zealand30%10%20%
South Africa30%10%20%
Kenya30%10%20%
Sweden30%10%20%
Norway30%10%20%
Thailand30%10%20%
Indonesia30%10%20%
Portugal30%10%20%
Luxembourg30%10%20%
Austria30%10%20%
Poland30%10%20%
Finland30%10%20%
China30%10%20%
Vietnam30%10%20%
Israel30%10%20%
Sri Lanka30%10%20%
Tanzania30%10%20%
Uganda30%10%20%
Nepal30%10%20%
Cyprus30%10%20%
Malta30%10%20%
Bangladesh30%10%20%
Russia30%10%20%
Mexico30%10%20%
UAE30%12.5%17.5%
US30%15%15%
UK30%15%15%
Singapore30%15%15%
Canada30%15%15%
Australia30%15%15%
Denmark30%15%15%
Philippines30%15%15%
Italy30%15%15%
Spain30%15%15%
Belgium30%15%15%
Brazil30%15%15%
Nigeria30%no DTAA,
Bahrain30%no DTAA,

Default TDS includes 4% Health and Education Cess. Treaty rate reflects the headline DTAA rate (cess and surcharge add on per the taxpayer's slab). The Bahrain “no DTAA” row reflects the fact that India and Bahrain have only a Tax Information Exchange Agreement (TIEA) signed 2012, no comprehensive treaty.

Work out your exact deposit TDS

Sources · checked 4 July 2026

  • Section 195: TDS on payments to non-residents; default 30% on NRO interest, plus surcharge and cess
  • Section 90 / 90A: DTAA relief; treaty rate available with Form 10F (Form 41 from FY 2026-27) and a TRC
  • Article 11 (the interest article in most of India's treaties): sets the reduced interest rate by country
  • Section 10(4)(ii): full exemption on NRE interest
  • Section 10(15)(iv)(fa): full exemption on FCNR interest
  • Section 119(2)(b) and CBDT Circular 11/2024: condonation to claim refunds up to 5 past years
  • Section 244A: 6% simple interest on a refund of excess TDS, from 1 April of the assessment year until it is credited

Each figure and section is verified against the primary sources on every review: the Income-tax Act and Rules (incometax.gov.in), RBI and FEMA (rbi.org.in), and the relevant tax-treaty texts.

Frequently asked questions

Common questions about How to avoid the 30% TDS on your NRO account interest

Because the law makes the bank withhold at the top non-resident rate, and it doesn't know your country or your treaty. You get the difference back by filing Form 10F (or Form 41) with your TRC and your Indian return, which brings the tax down to your treaty rate.

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Related guides

If this was useful, these go deeper on the same theme

NRO Fixed Deposits. The complete tax, FEMA and repatriation guide for NRIs

NRO fixed deposit interest is fully taxable, 30% plus cess under Section 195.

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Form 41 replaces Form 10F from FY 2026-27: what NRIs claiming DTAA benefits need to know

From FY 2026-27 Form 10F is called Form 41.

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NRI mutual fund TDS, why it's 30%, and how to get your treaty rate

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FCNR Fixed Deposits. The foreign-currency tax-free deposit

FCNR (B) interest is exempt under Section 10(15)(iv)(fa) with zero TDS, and it stays exempt through your RNOR years.

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Disclaimer: This page is for educational purposes only. The data shown is sourced from public AMFI / RBI / Income Tax Department / CBDT publications. We are not a SEBI-registered Investment Adviser and do not make product recommendations. For personalised tax or investment advice, please consult a qualified Chartered Accountant or SEBI-registered Investment Adviser. The country-by-country DTAA rates are based on India's notified treaties as of July 2026; treaty positions can change via protocol amendments and CBDT notifications.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

Treaty rate at source on NRO interest

Right now: Yes. With a valid Tax Residency Certificate and Form 41 (Form 10F for income up to 31 March 2026), the bank may deduct at the DTAA rate under Section 90(2); CBDT Circular 728 of 30 October 1995 directs deductors to apply the treaty rate where it is lower.

Where it works differently

The TRC or Form 41 reaches the bank after the interest is credited
The bank has already deducted 30%; that excess comes back only through the return (and condonation for past years).
Rate at source is decided on the date of credit.
The bank's branch refuses despite the documents
Escalate to the bank's NRI or DTAA desk; most large banks run one. A Section 197 (now Section 395) certificate is the fallback, not the first step.
Bank practice varies; the law permits the treaty rate at source.

Commonly got wrong

  • Banks must deduct the full 30% on NRO interest whatever documents you give them. Section 90(2) and Circular 728 let the payer apply the treaty rate once residency is evidenced.Give the bank a current TRC and Form 41 (formerly Form 10F) before the interest is credited and it deducts at your treaty rate. Only what was already cut at 30% needs a refund claim.

NRO account: what it costs and what it caps

Right now: Interest taxed at 30% plus surcharge and cess; repatriation capped at USD 1 million a financial year

Where it works differently

A TRC and Form 10F (Form 41 from 1 Apr 2026) are furnished
The treaty rate applies to the interest, commonly 10-15% under Article 11 instead of 30% plus surcharge.
s.90(2). This is the single largest recurring recovery item for most NRIs.
Remitting out
Form 15CA is needed, plus Form 15CB from a CA where the remittance is chargeable and above Rs 5 lakh in the year.
Rule 37BB.
Joint holders
The USD 1 million ceiling is per person per financial year, so joint holders each have their own.
FEMA 13(R).

Commonly got wrong

  • NRO interest is taxed at 30%. Incomplete. Surcharge and 4% cess sit on top, and a treaty can cut it to 10-15%.30% plus surcharge and cess by default, but 10-15% under most treaties if you hold a TRC and file Form 10F.

Condonation of delay window for refund and loss claims

Right now: 5 years from the end of the assessment year

Where it works differently

The claim arises from a court order
Different limitation applies. The period the matter was pending is generally excluded.
Para in Circular 11/2024.
Deciding authority
Tiered by claim amount across Principal Commissioner, Chief Commissioner and CBDT.
Circular 11/2024 monetary limits.

Commonly got wrong

  • The condonation window is six years. Circular 9/2015 was superseded on 1 October 2024.Five years, per Circular 11/2024.

TDS on NRO account interest

Right now: 30% plus surcharge and cess

Where it works differently

A valid TRC and Form 10F (Form 41 from 1 Apr 2026) are furnished
The treaty rate applies, commonly 10-15% under Article 11.
s.90(2) gives the more beneficial of treaty or Act.
No PAN is furnished
s.206AA imposes at least 20%, but Rule 37BC allows escape by furnishing name, address, TIN and TRC. Courts have also held s.206AA cannot override a treaty rate.
Rule 37BC + settled case law.
Claiming the treaty rate at source
The s.115A(5) filing exemption is lost, so an Indian return becomes necessary.
That exemption requires TDS at not less than the s.115A rate.
The account is NRE or FCNR instead
Interest is exempt and no TDS applies, while the holder is a FEMA non-resident.
s.10(4)(ii) and s.10(15)(iv)(fa).

Commonly got wrong

  • NRO interest TDS is 30%. Incomplete. Surcharge and 4% cess sit on top, so the effective rate is higher.30% plus surcharge and cess, around 31.2% at the base level.
  • You can file Form 15G/15H to stop NRO TDS. Those are resident-only declarations. An NRI filing one makes a false declaration.Use Form 13 (Form 128 from 1 April 2026), or claim the treaty rate with a TRC.

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