If you are a Non-Resident Indian (NRI) and have an NRO account in India, you might be paying 30% tax on the interest earned. This is due to TDS (tax deducted at source) deducted by banks. However, if your total taxable income in India is low or nil, you may be eligible for a refund of this tax. In this guide, we explain how to claim a refund of TDS on NRO account interest and get your money back legally and efficiently.

What Is TDS on NRO Account?

NRO (Non-Resident Ordinary) accounts are designed to hold income earned in India by NRIs, such as rent, pension, dividends, and interest from fixed deposits. Banks deduct 30% TDS on interest earned in these accounts, regardless of your total income. This can lead to excess tax being paid by NRIs who qualify for lower or no tax under Indian tax laws.

Can NRIs Claim a Refund of TDS on NRO Interest?

Yes. NRIs can claim a refund of excess TDS on NRO account interest by filing an income tax return (ITR) in India. This is particularly useful if your total Indian income is below the basic exemption limit or eligible for deductions.

Example: Tax Refund on NRO Account Interest

Let’s say you earned ₹50,000 as interest from an NRO fixed deposit and the bank deducted ₹15,000 as TDS (30%). But your total Indian income for the year is only ₹1,50,000, which is below the ₹4 lakh exemption limit under the new tax regime. In this case, you can claim a full refund of the TDS. This is a common scenario where NRIs can benefit by filing an ITR for NRO account tax refund.

How to Claim Refund of TDS on NRO Account Interest

Follow these steps to file your tax return and claim a refund of excess TDS deducted by your bank:

1. Register on the [Income Tax Portal](https://www.incometax.gov.in) using your PAN.
2. Download Form 26AS to check TDS details.
3. File ITR-2 form if you have no business income in India.
4. Report interest income from NRO account under ‘Income from Other Sources’.
5. Claim the TDS already deducted.
6. E-verify your return and wait for refund processing.

Important Tips for NRO Account Tax Refund

– Ensure your PAN is linked with your NRO account.
– File your ITR before the deadline to avoid delays.
– You can apply for a lower or nil TDS certificate using Form 13 to reduce future deductions.
– Track your refund status on the income tax portal.

Conclusion

Filing an ITR in India can help NRIs recover excess tax paid on NRO account interest. If you have been paying 30% TDS but your actual tax liability is lower, you are entitled to claim a refund. Understanding the NRO account tax rules and using the right steps can help you get back what you are owed. This guide helps NRIs manage tax on NRO account interest efficiently and ensures they do not lose money unnecessarily.

By: Vishal Shah, SEBI Registered Investment Advisor and founder of Bachhat

July 2, 2025

Disclaimer: This is not a financial advice and the readers should reach out to registered investment advisors for any financial advice. Registration granted by SEBI, membership of BASL and certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.