Skip to content
Got a notice? Emergency response

Vietnam

Indian interest and dividends when you are a Vietnamese tax resident

Vietnam's flat 5% on investment income sounds low, but the credit is capped, so India's higher rate can be what you actually pay.

You earn interest and dividends in India, an NRO account, some Indian shares, and you are a tax resident of Vietnam. Vietnam taxes investment income at a low flat rate, which sounds good, but two things catch Indians out: your tax-free NRE interest is not tax-free in Vietnam, and because Vietnam's credit for the India tax is capped at its own low rate, a treaty does not always leave you paying only the lower of the two. Here is how Indian interest and dividends really work for a Vietnamese resident.
Request a free CA call
Last reviewed: 26 July 20266 min readReviewed by Preetesh Maloo, CA

The short answer

In India, NRE interest is exempt, and NRO interest and dividends are taxable with TDS the treaty caps at 10%. Vietnam taxes its residents on worldwide income, and treats dividends and non-bank interest as investment income at a flat 5%. Two catches follow. NRE interest, tax-free in India, is taxed at 5% in Vietnam with no credit, because India charged nothing. And on NRO interest and dividends, India's treaty rate of 10% is higher than Vietnam's 5%, so Vietnam's credit only covers 5% of it, and the extra is not refunded, you effectively bear the higher India rate. So a treaty does not always mean you pay only the lower rate.

Is this your situation? Get a senior CA on it.

Free 15-minute call. We tell you what applies to you and what it costs, then you decide. You stay abroad.

Senior CA who specialises in NRI tax · we deal with the tax officer, you don't

Chat with a CA on WhatsApp

Full guide: Why NRO interest is taxed at 30%, and the fix

Related situations

The India side

In India, interest on an NRE account is exempt under Section 10(4) while you hold non-resident status, so India charges nothing and deducts no TDS. NRO interest is taxable, with TDS under Section 195, and Indian dividends are taxable with TDS deducted by the company, both reducible to the treaty rate of 10% if you file a tax residency certificate and Form 10F. So on the Indian side, NRE is untaxed and NRO interest and dividends are taxed at up to 10%.

Vietnam, the NRE trap, and the capped credit

Vietnam taxes its residents on worldwide income, and treats dividends and non-bank interest as investment income at a flat 5%. That low rate is where the two traps hide.

First, the NRE trap. NRE interest is exempt in India, but that is an Indian rule, and for a Vietnamese resident it is worldwide income taxed at 5%. Because India levied nothing, there is no India tax to credit, so you bear the full Vietnamese 5%. The tax-free NRE account is tax-free only in India. Second, the capped credit, which surprises people who assume a treaty means paying only the lower rate. On NRO interest and dividends, India taxes at the treaty rate of 10%, and Vietnam taxes at 5% but gives a credit for the India tax capped at its own 5%. So Vietnam's credit soaks up 5% of the India tax, the other 5% is not refunded, and the net effect is that you bear the higher India rate of 10%, with Vietnam collecting nothing extra. So a treaty relieves double tax, it does not automatically hand you the lower of the two rates.

What's involved

What the CA actually does

  1. 1

    We cap the Indian tax at 10%

    We file your tax residency certificate and Form 10F so NRO interest and dividends are taxed at the treaty rate in India, not the higher domestic rate.

  2. 2

    We flag the NRE point

    We make sure your NRE interest is reported in Vietnam, since it is taxable there at 5% despite being exempt in India.

  3. 3

    We explain the capped credit

    We show where India's 10% exceeds Vietnam's 5%, so you know the extra is not refunded and plan around bearing the higher rate.

  4. 4

    We provide the credit figures

    We give your Vietnamese accountant the India-tax-paid detail so the credit is claimed correctly, as far as it goes.

What to have ready

Documents you'll typically need

  • Your NRO interest and Indian dividends, and any NRE interest
  • The TDS the bank or company deducted
  • Your tax residency certificate and Form 10F, if filed
  • Your PAN and Vietnamese tax details

References on this page

  • NRE interest is exempt in India (Section 10(4)); NRO interest and dividends are taxable, TDS capped at the treaty rate of 10%
  • Vietnam taxes worldwide income; dividends and non-bank interest are investment income at a flat 5%
  • NRE interest is taxed at 5% in Vietnam with no credit, because India charged nothing
  • Vietnam's credit is capped at its 5%, so India's higher 10% is what you effectively bear on NRO interest and dividends

Frequently asked questions

Common questions

No. NRE interest is exempt in India, but a Vietnamese resident is taxed on worldwide income, so it is taxed at Vietnam's flat 5% on investment income, and because India took no tax there is no credit.

No. The treaty relieves double tax, but Vietnam's credit for the India tax is capped at its own 5%. So on NRO interest and dividends, where India taxes at 10%, the extra 5% is not refunded and you effectively bear the higher India rate.

File a tax residency certificate and Form 10F with the Indian payer so it withholds at 10%, not the higher domestic rate. That is the most you can bring the India side down to.

Mostly India. India takes its 10% treaty rate, Vietnam credits 5% of that and collects nothing extra, so the effective cost is the 10% India rate. Vietnam's low rate does not help because the credit is capped.

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.

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.

Related

If this matched your situation, these go further

Indian shares and mutual funds when you are a Vietnamese tax residentSelling Indian property while you are a Vietnamese tax residentProving the tax you paid in India, to claim a foreign tax credit abroadNRI ITR filing (we file for you)DTAA TDS recoveryStocks / equity redemption coordinationForm 10F generatorDTAA rate lookup

Indian interest and dividends on a Vietnamese return?

Tell us the income and the TDS. A practising CA will cap the Indian tax and explain the credit on a free call, no obligation.

Request a free CA call

No card, no obligation. All certification and filing work is handled by ICAI-registered practising Chartered Accountants.