For example, if a person is working in the US for more than 181 days then he becomes an NRI. He will be unable to handle any domestic saving deposit account in India.
So, he has to convert his savings account to an NRO savings account where he can put his money. It will also allow him to make transactions of funds originating in India such as rents, dividends, pensions etc.
However, tax deducted at source on interest income earned in NRO account is 30.9 per cent, so much of your returns will be gone paying taxes.
In order to avoid paying 30.9 per cent as taxes you need to fill the DTAA. You will be able to avail TDS of 10 per cent if you live in any of the following country and you fill the DTAA form.
List of countries with whom India has singed DTAA are :
13. Czech Republic
23. Hashemite kingdom of Jordan
35. Kyrgyz Republic
50. New Zealand
55. Portuguese Republic
59. Saudi Arabia
63. South Africa
65. Sri Lanka
68. Swiss Confederation
69. Syrian Arab Republic
73. Trinidad and Tobago
77. UAR (Egypt)
81. United Mexican States
If you have an NRO account then you must fill in the DTAA form to avoid TDS of 30.9 per cent. You can check from the list given here whether the country in which you are residing in as NRI has signed a DTAA with India.
If TDS has been deducted, you can claim the money by filing your tax returns.
Why you should know the list of DTAA countries?
You should know the list of DTAA countries, simply because, you can avoid paying tazes twixe. What the agreements basically says that is your paying tax already once and hence, you should not be taxed again.
Especially, if you are an NRI and employed in a country like the United States, you can save on taxes.
What to do to implement the DTAA?
Now, let us assume that have a TDS, that is being deducted at 30.6 per cent on your NRO deposits. You need to apply to your bank and submit a range of documents like a valid visa, bank statement in the country of your residence, etc. Thereafter, if there is a DTAA agreement with the country of your residence, tax would be implemented only at the rate of 10 per cent.
You would need to submit an application at the nearest bank.
Rememeber, the list of DTAA countries will keep changing, based on the agreements that are altered frequently. We suggest you check with your bank for all the other details.