What rate of TDS does my Indian bank deduct on NRO interest if I live in Sri Lanka?

By default your bank deducts 30% under Section 195 — the non-resident rate. With a valid Form 10F and a Tax Residency Certificate from Inland Revenue Department (IRD), the India-Sri Lanka treaty brings that down to 10% on the interest. Anything deducted above the treaty rate before your paperwork was on file can be reclaimed through your Indian return.

Can I get back TDS that was already over-deducted on my NRO account?

Yes. The over-withheld amount is reclaimed by filing your Indian income tax return: the bank's TDS shows against your PAN in Form 26AS, you compute the tax actually due at the 10% treaty rate, and the excess is refunded with Section 244A interest. Missed prior years can usually be picked up through a condonation request within the CBDT's window.

What paperwork do I need as an NRI in Sri Lanka to claim the lower NRO TDS rate?

Two core documents: a Tax Residency Certificate issued by Inland Revenue Department (IRD), and Form 10F filed on the Indian e-filing portal. Together they tell your bank to apply the India-Sri Lanka treaty rate of 10% instead of the 30% default. The TRC has to be renewed each period it covers, otherwise the bank reverts to the full rate.

Sri Lanka NRIs · NRO TDS Recovery

NRO account TDS recovery for NRIs in Sri Lanka

Your Indian bank deducts tax on NRO interest at the full non-resident rate — the India-Sri Lanka treaty lets you bring it down and reclaim the excess.

If you live in Sri Lanka and hold an NRO fixed deposit or savings account in India, your bank deducts tax at source on the interest at 30% — the default Section 195 rate for a non-resident. The India-Sri Lanka tax treaty caps that interest withholding at 10% (Article 11: 10% treaty cap on Indian-source interest), so for most Sri Lanka NRIs the gap between the two is over-withheld tax you are entitled to recover. To claim the lower rate you file Form 10F backed by a Tax Residency Certificate from your country of residence, and any tax already over-deducted comes back as a refund when you file your Indian return.

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India-Sri Lanka key facts: nro tds recovery

Default Section 195 rate	30%
India-Sri Lanka DTAA treaty rate	10%
Your saving via the treaty	20%
Treaty article / basis	Article 11: 10% treaty cap on Indian-source interest
Your TRC issuing authority	Inland Revenue Department (IRD)

Rates reflect India's domestic Section 195 withholding and the India-Sri Lanka treaty. Surcharge and cess apply on top where relevant.

How it works on the India side

Indian banks apply TDS on NRO interest under Section 195 at the 30% non-resident rate (plus surcharge and cess) unless you have given them a valid Form 10F and Tax Residency Certificate showing you qualify for the treaty rate. Once those are on file, the bank deducts at the lower DTAA rate going forward.

For interest the bank has already over-deducted, the route is your income tax return: the TDS the bank deposited shows in your Form 26AS and AIS against your PAN, you compute your actual liability at the treaty rate, and the difference is refunded with interest under Section 244A. Past years that were missed can often still be recovered through a condonation request, within the window the CBDT allows.

What changes because you live in Sri Lanka

Sri Lankan residents are taxed on worldwide income, with a foreign tax credit for the Indian tax paid. The standout benefit is the dividend rate: the treaty caps Indian dividends at just 7.5%, one of the lowest India offers any country, so claim it up front with a TRC and Form 10F rather than letting the company withhold 20%. Note that the large Hill-Country Tamil community are mostly Sri Lankan citizens, not NRIs, so your Indian-passport and OCI status is what decides whether the treaty applies.

Frequently asked questions

Common questions from Sri Lanka NRIs

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DTAA TDS recovery service Sri Lanka NRI tax guide — all income types & DTAA rates

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