Why your bank takes 30%, 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 live | Your treaty rate on interest |
|---|---|
| UAE | 12.5% |
| US, UK, Singapore | 15% |
| Saudi Arabia, Qatar, Netherlands, Germany, France | 10% |
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.