NRIs must submit the DTAA form and other details or face higher TDS

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NRIs must submit the DTAA form and other details or face higher TDS
If you have opened a NRO Savings Account or a NRO Fixed Deposit, it's certain that you would have seen a huge amount being deducted by way of tax on interest income earned.

In fact, if you have earned Rs 10,000 as interest, Rs 3100 would disappear as tax and you would be left with only Rs 6900. That is a huge 30.9 per cent gone.

Tax Deducted at Source (TDS) on interest earned on NRO Fixed Deposits of a huge 30.9 per cent is currently applicable including a cess of 3 per cent. Now, this is restricted only to NRO Savings and NRO Term Deposits and not NRE Deposits.

Now, you can reduce the TDS from your NRO Fixed Deposits, if you submit the DTAA form and other relevant details.

India has signed a Double Taxation Avoidance Agreement (DTAA) with several countries, including most of the countries in the Middle East, US, Australia etc. See the detailed list here

So, what this DTAA agreement means is that you should not be taxed for income earned in India, since you are already being taxed in the country of your residence. Hence, if you are a NRI residing in one of the countries mentioned in the list, you can avail a TDS of just 10 per cent, as against 30.9 per cent. Read more on DTAA here

What you need to do to lower TDS on NRO Deposits?

Each year by March 15, you must submit the details of your PAN Card along with the following:

DTAA Disclosure

1) You have to make a declaration that you are a NRI during the year in which tax is sort to be deducted and that you do not have any permanent establishment in India.

2) Original or certified true copies of the tax residency certificate from income tax authorities to be obtained from the client.

3) Self attested copy of passport & visa. (not required in case the client is submitting Tax Residency Certificate).

If you are residing in UAE or Kuwait you must give a photocopy of the passport pages which give the details of entry and exit. (this it to ascertain 183 days stay in a calendar year for UAE and 183 days in a financial year for Kuwait).


It's important to remember that if you are a NRI, it would be very unwise to open a NRO Deposit in the first place and than go through the hassle of completing the DTAA agreement procedure. The best bet would be to open a NRE Fixed Deposit and NRE Savings Account, whose income is tax free. This would save you even the 10 per cent TDS that would be applicable on NRO Deposits, even after complying with all the DTAA requirements.

Interest rate on NRE and NRO Deposits are the same and why would you ever want to pay tax, when you have a legitimate option of not paying.

So, go for a NRE deposit and save your self the hassle of paying taxes.  Read the difference between NRO and NRO Deposits here

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Story first published: Saturday, June 28, 2014, 10:19 [IST]
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