Your bank deducted ₹90,000 as TDS on ₹3 lakh of NRO interest. But your total Indian income for the year is just ₹3 lakh — well within the basic exemption limit. Your actual tax liability? Zero. That ₹90,000 is your money, and the government owes it back.
This is one of the most common financial situations NRIs face. TDS is deducted at flat rates — 30% on NRO interest, 31.2% on rent, 20% on dividends, 12.5–30% on capital gains — without any consideration for your actual income, deductions, or DTAA entitlements. The result: most NRIs overpay, often by lakhs.
The only way to get that excess back is to claim a TDS refund by filing your income tax return. Here’s how, step by step.
Why NRIs Overpay TDS in the First Place
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Banks, tenants, mutual fund AMCs, and property buyers are required to deduct TDS at prescribed rates before paying you. They don’t check your total income. They don’t apply DTAA rates automatically. They don’t factor in deductions or exemptions. They simply deduct at the statutory rate and deposit it with the government. “TDS rates and rules for NRIs“
This means TDS is almost always higher than your actual tax liability, because your actual liability accounts for the basic exemption limit (₹2.5 lakh under old regime, ₹4 lakh under new regime), applicable deductions (30% standard deduction on rental income, home loan interest, Section 80C/80D under old regime), DTAA treaty rates (often 10–15% vs the default 30%), and the fact that capital gains TDS on property is deducted on the full sale consideration — not just the actual gain.
The gap between TDS deducted and tax actually owed is your refund. For NRIs with rental income, NRO interest, or property sales, this gap can easily be ₹50,000 to ₹5 lakh or more.
Step 1: Verify Form 26AS and AIS Before You File
This is the step most NRIs skip — and the one that causes the most refund delays.
Form 26AS is your tax credit statement. It shows every TDS deduction made against your PAN during the financial year — by banks, tenants, AMCs, property buyers, and anyone else who deducted tax at source. Think of it as the government’s record of what was deducted on your behalf.
The Annual Information Statement (AIS) is a more detailed companion document. It shows all financial transactions linked to your PAN — TDS credits, interest earned, dividends received, property transactions, and mutual fund activity.
Before filing, log into the Income Tax e-filing portal and pull up both documents. Compare every entry against your own records. Specifically check that every TDS deduction you expect to claim is visible in Form 26AS, that the amounts match what was actually deducted from your payments, and that there are no entries you don’t recognise (which could indicate PAN misuse).
If a TDS entry is missing — say, your tenant deducted TDS but hasn’t deposited it yet — do not file until it appears. Claiming credit for TDS not reflected in Form 26AS is the single most common reason NRI refunds get flagged, delayed, or rejected.
Step 2: Calculate Your Actual Tax Liability
Now work out what you actually owe. Add up all your Indian income — NRO interest, rental income, capital gains, dividends — and compute taxable income after applicable deductions.
A quick example: you earn ₹4 lakh from NRO FD interest and ₹6 lakh in rental income. Your bank deducted ₹1,20,000 TDS on the interest (30%). Your tenant deducted ₹1,87,200 TDS on rent (31.2%). Total TDS: ₹3,07,200.
But your actual taxable rental income after 30% standard deduction and municipal taxes might be ₹3,78,000. Total taxable income: ₹7,78,000. Under the new tax regime, your tax on this is approximately ₹29,900 (5% on ₹3,78,000 above the ₹4 lakh threshold, plus cess). Your refund: ₹3,07,200 minus ₹29,900 = ₹2,77,300.
That’s real money. And without filing, it stays with the government.
Step 3: File ITR-2 and Claim the Refund
NRIs must use ITR-2 for most income types (salary, property income, capital gains, interest, dividends). If you have business or professional income in India, use ITR-3. NRIs cannot use ITR-1 or ITR-4. “when ITR filing is mandatory for NRIs“
When filing, declare all Indian income under the correct schedules. Report rental income under “Income from House Property.” Report interest and dividends under “Income from Other Sources.” Report capital gains under the appropriate schedule with holding periods and sale details.
In the TDS schedule, enter every TDS credit exactly as it appears in Form 26AS. Any mismatch — even ₹100 — can trigger processing delays. If you’re eligible for DTAA benefits, fill Schedule TR (Tax Relief) and Schedule FSI (Foreign Source Income) to claim treaty rates. Attach your Tax Residency Certificate (TRC) and ensure Form 10F is filed on the portal.
The due date for FY 2025-26 is 31st July 2026. File before the deadline to preserve your right to choose between old and new tax regimes and to carry forward any losses.
Step 4: E-Verify Immediately
This is where many NRIs lose weeks or months. Your return is not valid until it’s verified. Processing — and therefore your refund — doesn’t begin until verification is complete.
You have 30 days from filing to e-verify. Three options work for NRIs: Aadhaar OTP (if your Aadhaar is linked to an Indian mobile number), net banking through an Indian bank linked to the portal, or sending a signed physical ITR-V to CPC Bangalore by post.
Aadhaar OTP is fastest — takes seconds. If you don’t have an active Indian mobile number linked to Aadhaar, net banking is the next best option. The physical post route takes weeks and is unreliable from abroad.
Do not wait. Verify the same day you file.
Step 5: Track Your Refund Status
After e-verification, the CPC (Centralised Processing Centre) processes your return. Refunds are typically credited within 4–6 weeks of successful processing — though in high-volume periods, it can stretch to 3–4 months.
Track your refund status on the e-filing portal under “My Account” → “Refund/Demand Status.” You’ll see stages like “Return Submitted,” “Return Processed,” “Refund Issued,” and finally “Refund Credited.” If your status shows “Refund On Hold” or stays stuck on “Under Processing” for over 90 days, it’s time to investigate.
The refund is credited to the Indian bank account linked to your PAN on the e-filing portal. This must be a pre-validated account — and for NRIs, it should be an NRO account (refunds cannot be credited to NRE accounts).
Five Reasons NRI Refunds Get Stuck — and How to Avoid Them
1. TDS mismatch with Form 26AS. You claimed ₹2 lakh TDS but Form 26AS shows only ₹1.8 lakh because your tenant hasn’t filed their TDS return yet. Fix: reconcile before filing. Chase the deductor if entries are missing.
2. Bank account not pre-validated. The refund is issued but bounces because your bank account details are incorrect, the account is dormant, or it’s not pre-validated on the portal. Fix: pre-validate your NRO account under “Profile Settings” → “Manage Bank Account” before filing.
3. ITR not e-verified within 30 days. Your return sits unprocessed. No verification = no processing = no refund. Fix: verify the same day you file.
4. Wrong ITR form used. Filing ITR-1 as an NRI results in a defective return notice. Fix: always use ITR-2 (or ITR-3 for business income).
5. Outstanding tax demand from a prior year. Under Section 245, the department can adjust your refund against old demands — even if those demands are incorrect. Fix: check for pending demands on the portal and respond to any outstanding notices before filing.
Preventing Over-Deduction: Stop the Problem at Source
The best refund is the one you don’t need to claim. Two strategies can prevent excess TDS from being deducted in the first place.
Lower Deduction Certificate (Form 13 under Section 197). If your actual tax liability is lower than the standard TDS rate, apply for this certificate from your Assessing Officer. Once issued, your bank, tenant, or buyer can deduct TDS at the reduced rate — often 5–15% instead of 30%. “NRI rental income tax and the 31.2% TDS“
DTAA documentation submitted upfront. Provide your TRC and Form 10F to the deductor (bank, AMC, tenant) before the financial year begins. Many DTAAs prescribe lower rates on interest (often 10–15%) and capital gains. If the deductor has your DTAA documentation on file, they can apply the treaty rate at source instead of the statutory rate.
Both strategies require planning ahead — not reacting after the deduction has happened.
The Bottom Line
If you’re an NRI with Indian income, you’re almost certainly overpaying TDS. The only way to get that money back is to file your ITR, claim your refund, and follow through with e-verification and tracking.
Our team handles this end to end — from Form 26AS reconciliation and refund computation, to ITR filing, e-verification, and refund tracking. We also apply for Lower Deduction Certificates and set up DTAA documentation so your deductors get it right from the start. If you’d like us to recover what’s yours, reach out and we’ll take it from here.
Common Questions About NRI TDS Refunds
How long does it take to get a TDS refund as an NRI?
Once your ITR is e-verified and processed, refunds are typically credited within 4–6 weeks. However, in high-volume filing periods, processing can take 3–4 months. Delays beyond 90 days usually indicate a mismatch with Form 26AS, a bank account validation issue, or an outstanding tax demand being adjusted.
Can NRIs use Form 15G or 15H to avoid TDS?
No. Forms 15G and 15H are exclusively for resident Indians. NRIs cannot use these forms to prevent TDS deduction. The NRI alternatives are a Lower Deduction Certificate under Section 197 (Form 13) or submitting DTAA documentation (TRC + Form 10F) to the deductor for treaty-rate deduction.
Which bank account receives the TDS refund for NRIs?
The refund is credited to the Indian bank account linked to your PAN on the e-filing portal. For NRIs, this must be a pre-validated NRO account. Refunds cannot be credited to NRE accounts. Ensure the account is active and correctly linked before filing.
Can I claim a TDS refund if I missed the filing deadline?
Yes, but with consequences. You can file a belated return until 31st December of the assessment year (i.e., 31st December 2026 for FY 2025-26). The refund claim remains valid, but you’ll pay a late fee of up to ₹5,000 under Section 234F, lose the option to choose the old tax regime, and cannot carry forward capital losses.
Does filing for a TDS refund trigger scrutiny?
Not by itself. Claiming a legitimate refund by filing an accurate ITR is standard compliance. However, claiming TDS credits that don’t match Form 26AS, using the wrong ITR form, or making computational errors can trigger notices. Accuracy and reconciliation before filing are your best protection.
Disclaimer: This blog is for informational purposes only and should not be construed as financial, tax, or legal advice. Tax laws and regulations are subject to change. Readers are advised to consult a qualified tax professional or chartered accountant for advice specific to their individual circumstances. The information presented here is based on publicly available data as of the date of publication and may not reflect the most recent regulatory changes.
