TDS Was Cut on Your NRO Interest. Can You Get It Back?
NRI Tax Basics · Published 16 Oct 2026 · 3 min read
"The bank already cut the tax. Isn't that the end of it?"
Suresh works in Abu Dhabi. When his father passed away, he inherited ₹40 lakh, which now sits in an NRO fixed deposit in Kochi. It earns about ₹2.8 lakh a year in interest.
Every year, his bank deducts about ₹87,000 as TDS before crediting the interest. Suresh assumed that was simply "the tax for NRIs" and moved on. He has never filed an Indian tax return. "Why file? The tax is already paid," he told his cousin.
His cousin, a chartered accountant, did a quick calculation on a napkin and showed him the answer: Suresh owed zero tax. All ₹87,000 had been his money all along, and he had left it with the government for four years running.
TDS is an advance, not your final tax
TDS means "tax deducted at source". The bank cuts it before paying you, as an advance in case you owe tax. It is not a calculation of what you actually owe.
For NRO interest, banks deduct at a flat 30% plus cess (about 31.2%), whatever your real income. A billionaire and a student get the same cut. Your actual tax depends on your total Indian income, worked out using the normal tax slabs.
When the advance (TDS) is bigger than your real tax, the difference is a refund. There is only one way to get it back: file an Indian income tax return.
Suresh's numbers
| Amount | |
|---|---|
| NRO interest for the year | ₹2,80,000 |
| TDS cut by the bank (about 31.2%) | ₹87,360 |
| His only Indian income | ₹2,80,000 |
| Actual tax (income below the ₹4 lakh no-tax limit under the new regime, FY 2025-26) | ₹0 |
| Refund due | ₹87,360 |
An illustration. Your refund depends on your total Indian income and the regime you choose.
Even when your income is above the no-tax limit, your real tax rate is often well below 31.2%, so a part of the TDS usually comes back.
A shortcut: pay less TDS in the first place
India has tax treaties (DTAAs) with many countries. For interest, these treaties often cap India's tax at a lower rate, commonly 15% for countries like the US, UK and Canada.
To use it, give your bank two documents before the interest is paid:
- A Tax Residency Certificate (TRC) from your country of residence
- Form 10F (a simple self-declaration, filed online on the Indian income tax portal)
The bank can then deduct at the treaty rate instead of 31.2%. You may still file a return to recover anything extra, but you get more money in hand during the year. (Our article You Earn Income in India. Are You Being Taxed Twice? explains how treaties work.)
The solution: file once a year and get your money back
Suresh filed his first return with his cousin's help, and the refund reached his bank account a few months later with interest. Here's the same path for you:
- Collect your TDS certificates (Form 16A) from each bank, and check your tax statement (Form 26AS / AIS) on incometax.gov.in.
- Add up all your Indian income: NRO interest, rent, capital gains, dividends.
- File your return, usually ITR-2 for NRIs, by the due date (normally 31 July). Choose "non-resident" as your status.
- Pre-validate your bank account on the tax portal so the refund lands directly.
- E-verify the return. It isn't processed until you do.
Before you start, check these
- Your PAN is active and linked correctly on the portal
- Each bank has your PAN (without it, TDS can be even higher)
- You have a TRC if you want the treaty rate next year
- You know your old unclaimed years. Late or updated returns may still be possible within time limits, so ask a CA
The 30-second takeaway
The 31.2% your bank cuts is an advance, not your real tax. If you don't file a return, the extra simply stays with the government.