How to reduce TDS on NRO Fixed Deposit using DTAA?

In last article, I told you that you can use the DTAA (Double Tax avoidance Agreement) to prevent double taxation of same income in two countries. Since most of the NRI pay their taxes in their country of employment or resident, they can also take advantage of DTAA to reduce TDS on NRO fixed deposits held in India, both private and public sector banks. Since banks are suppose to withhold tax of 30% plus applicable surcharge and cess in terms of the provisions of section 195 of the Income-tax Act, you end up paying very high TDS up-to 30.9% on NRO fixed deposit, which is enough to wipe out 1/3rd of your interest.

There are two ways to earn more interest on NRO fixed deposits, first by using DTAA to ask bank to deduct tax at lower rate and second file income tax returns to claim the money withhold (see here). Let's first see how you can save tax using DTAA.

Documents required for DTAA Tax Saving

If you are an NRI and tax resident of a country, which have signed DTAA with India e.g. Singapore, USA, UK, Canada, Australia (full list here) than you can claim the benefit of the double tax avoidance agreement between India and your country of employment. The DTAA would allow you ask banks to deduct TDS at a lower rate of 12.50% (depending upon the country you are currently working or living) .


To claim this benefit, you need to submit following documents:
1) Tax Residency Certification (TRC)
2) Form 10F
3) and PAN Number

The TRC or tax residency certificate should be issued by the tax/finance governing body of your country of employment. Suppose you have NRO fixed deposit in State Bank of India, than in addition to TRC, you also need to submit Form 10F to SBI with details of your status, Permanent Account Number (PAN), address, nationality, Tax Identification Number and the period for which the tax residential status is applicable. The bank would then withhold tax at the lower rate.

Don't forget PAN Number

Please note that if you do not have Permanent Account Number or PAN, banks can deduct TDS with maximum rate of 20%. You may also claim tax refund by filing income tax return wherein you would be entitled to the threshold exemption limit and benefit of lower slab rates.

So, if you have not submitted PAN numbers to your bank then do it along with DTAA. There is no point more tax if you are putting hard effort to take benefit of DTAA.

Here is a summary of what documents you need to reduce TDS on NRO fixed deposit:

That's all about how to use DTAA to save tax and ask banks to deduct TDS at lower rate in case of NRO fixed deposit. We have also learned about the documents required to take benefit of DTAA. Remember, you need TRC (Tax Residency Certificate) issued by your country of employment. Along with that you need to submit form 10F with your bank e.g. ICICI, HDFC, or SBI with details of your residential status, PAN, address, nationality and tax identification number.