NRIs pay 30% TDS on bank FD interest. Residents pay 10% — and only above Rs 50,000. That is the single biggest difference between NRI and resident taxation in India, and it applies across almost every income type: dividends, rent, mutual funds, professional fees.
This guide covers TDS rates on every income type an NRI earns in India — except property sale capital gains, which has its own detailed process involving Form 13, Form 15CA, and Form 15CB. For property transactions, read the dedicated NRI property sale TDS guide.
NRI vs Resident TDS Rates — Complete Comparison Table FY 2026-27
This is the table you need. Every income type, side by side.
| Income Type | Section (Resident / NRI) | Resident TDS Rate | Resident Threshold | NRI TDS Rate | NRI Threshold |
|---|---|---|---|---|---|
| Bank FD / RD interest | 194A / 195 | 10% | Rs 50,000/year | 30% (+cess) | Rs 0 (no threshold) |
| Savings account interest | 194A / 195 | 10% | Rs 50,000/year | 30% (+cess) | Rs 0 |
| Dividend income | 194 / 195 | 10% | Rs 5,000/year | 20% (+cess) | Rs 0 |
| Rental income | 194-IB / 195 | 2-10% | Rs 50,000/month | 30% (+cess) | Rs 0 |
| MF equity LTCG (>12 months) | 194K / 195 | 10% | Rs 10,000 | 12.5% on gain | Rs 0 |
| MF equity STCG (<12 months) | 194K / 195 | 10% | Rs 10,000 | 20% | Rs 0 |
| MF debt gains | 194K / 195 | 10% | Rs 10,000 | Slab rate (~30%) | Rs 0 |
| EPF premature withdrawal | 192A | 10% | Rs 50,000 | 10% | Rs 50,000 |
| Professional / technical fees | 194J / 195 | 10% | Rs 30,000/year | 40% (foreign company) | Rs 0 |
| Salary | 192 | Slab rates | Exemption limit | Slab rates | Exemption limit |
Key pattern: Residents get thresholds. NRIs don’t. Residents pay 10%. NRIs pay 20-30%. The only exceptions are salary (same slab rates for both) and EPF (same 10% for both).
For the complete section-wise TDS chart covering all payer types, see the TDS rate chart FY 2026-27.
NRE vs NRO Accounts — The Tax Difference is Massive
NRE account interest: fully exempt. Section 10(4)(ii) of the Income Tax Act exempts all interest earned on NRE accounts — savings and fixed deposits. Zero TDS. Zero tax. FCNR (Foreign Currency Non-Resident) deposit interest is also fully exempt.
NRO account interest: fully taxable at 30%. Every rupee of interest on an NRO account attracts TDS at 30% plus 4% health and education cess = 31.2%.
| Account Type | Interest Taxable? | TDS Rate | Tax-Free? |
|---|---|---|---|
| NRE Savings | No | 0% | Yes, Section 10(4)(ii) |
| NRE FD | No | 0% | Yes, Section 10(4)(ii) |
| FCNR Deposit | No | 0% | Yes |
| NRO Savings | Yes | 30% + cess | No |
| NRO FD | Yes | 30% + cess | No |
Strategy: Maximize NRE FD balances. Keep only operationally necessary amounts in NRO. If you receive rental income or dividends into NRO, sweep the balance to NRE periodically (within the USD 1 million annual repatriation limit after tax).
NRO FD TDS — The Math of Overpayment
Here is exactly what happens to a Rs 10 lakh NRO fixed deposit at 7% interest:
| Item | Amount |
|---|---|
| Principal | Rs 10,00,000 |
| Annual interest at 7% | Rs 70,000 |
| TDS at 30% | Rs 21,000 |
| Cess at 4% on TDS | Rs 840 |
| Total TDS deducted | Rs 21,840 |
| Net interest credited | Rs 48,160 |
Now, if your total India income for the year is Rs 70,000 (just this FD interest), your actual tax liability under the new regime is nil — it falls below the Rs 4 lakh basic exemption limit.
You have overpaid Rs 21,840. The only way to get it back: file an ITR in India.
If your total India income puts you in the 10% slab, your actual tax on Rs 70,000 is approximately Rs 7,280. You have overpaid Rs 14,560. Again — file ITR, claim refund.
This is why every NRI with Indian income should file an ITR, regardless of whether it is mandatory. Use the ITR filing guide for the step-by-step process. For portal access issues, see the NRI income tax login guide.
DTAA Rates — Country-Wise TDS Caps
Double Taxation Avoidance Agreements can reduce TDS below domestic rates. The DTAA rate applies only when it is lower than the domestic Indian rate.
| Country | Interest (Domestic: 30%) | Dividend (Domestic: 20%) | Royalty |
|---|---|---|---|
| USA | 15% | 25% (no benefit) | 15% |
| UK | 15% | 15% | 15% |
| Canada | 15% | 25% (no benefit) | 15% |
| Singapore | 15% | 15% | 10% |
| UAE | No benefit on interest | — | — |
Important notes on DTAA:
- USA/Canada dividends: The DTAA rate for dividends is 25%, which is higher than India’s domestic 20%. So no DTAA benefit on dividends for US/Canada NRIs.
- UAE interest: The India-UAE DTAA does not provide a reduced rate on interest income. UAE NRIs pay the full 30% domestic rate.
- UK/Singapore dividends: DTAA caps at 15%, which is lower than the domestic 20%. Genuine benefit here.
How to Claim DTAA Benefit
You need two documents:
- Tax Residency Certificate (TRC) — Issued by the tax authority of your country of residence. In the USA, this is IRS Form 6166. In the UK, a letter from HMRC.
- Form 10F — Filed on the Indian income tax portal. Contains your details and treaty article being claimed.
Submit both to the deductor (bank, AMC, tenant) before the income is paid. If you miss the deadline, the domestic rate applies and you claim DTAA relief in your ITR.
Rental Income — The 30% Problem for NRI Landlords
When a tenant pays rent to an NRI landlord, the tenant must:
- Obtain a TAN (Tax Deduction Account Number)
- Deduct TDS at 30% plus cess under Section 195
- Deposit TDS with the government by the 7th of the following month
- File quarterly TDS returns (Form 27Q)
There is no threshold. Even Rs 10,000 monthly rent to an NRI requires TDS deduction.
Compare this to a resident landlord: the tenant deducts only 2% under Section 194-IB, and only if rent exceeds Rs 50,000 per month.
The Real Impact
| Scenario | Monthly Rent | Annual Rent | TDS Deducted | Net to NRI |
|---|---|---|---|---|
| NRI landlord (Section 195) | Rs 40,000 | Rs 4,80,000 | Rs 1,49,760 (31.2%) | Rs 3,30,240 |
| Resident landlord (Section 194-IB) | Rs 40,000 | Rs 4,80,000 | Rs 0 (below threshold) | Rs 4,80,000 |
The NRI loses Rs 1,49,760 to TDS on the same rental income where a resident pays zero TDS. If the NRI has a home loan on the property, the cash flow crunch is severe.
Solution: Section 197 Lower TDS Certificate
This is the most important tool for NRI landlords:
- Log in to the income tax e-filing portal
- Navigate to Form 13 under “Pending Actions”
- Fill in your estimated income, deductions (Section 24(b) home loan interest, Section 80C), and expected tax liability
- Submit — the Assessing Officer reviews and issues a certificate within 2-4 weeks
- Share the certificate with your tenant
The certificate is valid for one financial year. If your actual tax liability after deductions is 10%, the certificate will direct the tenant to deduct TDS at 10% instead of 30%.
For the detailed Form 13 process with property sale context, refer to the NRI property sale TDS guide.
Mutual Fund TDS for NRIs
AMCs deduct TDS at the time of redemption. The rates depend on fund type and holding period:
| Fund Type | Holding Period | Tax Rate | TDS by AMC |
|---|---|---|---|
| Equity MF | >12 months (LTCG) | 12.5% above Rs 1.25 lakh | 12.5% on gain |
| Equity MF | <12 months (STCG) | 20% | 20% on gain |
| Debt MF | Any period | Slab rate (typically 30%) | 30% on gain |
| Hybrid (equity >65%) | Same as equity | Same as equity | Same as equity |
| Hybrid (equity <65%) | Same as debt | Same as debt | Same as debt |
US and Canada NRI Restrictions
Many Indian AMCs do not accept fresh investments from NRIs residing in the USA or Canada. This is due to FATCA (Foreign Account Tax Compliance Act) compliance costs. The situation:
- Fresh investments: Most AMCs reject new applications from US/Canada NRIs. A few AMCs (UTI, SBI, ICICI Prudential) still accept with additional documentation.
- Existing investments: NRIs who invested before moving to the US/Canada can typically continue SIPs and redeem. But this varies by AMC.
- Switch and redemption: Generally allowed for existing folios.
NRIs from other countries (UK, UAE, Singapore, Australia) face no such restrictions at most AMCs.
Dividend Income — 20% TDS for NRIs
Since dividends became taxable in the hands of shareholders (post Finance Act 2020), NRIs face 20% TDS plus cess on all dividend income from Indian companies and mutual funds.
| Payer | Resident TDS | NRI TDS |
|---|---|---|
| Listed company dividend | 10% above Rs 5,000 | 20% + cess, no threshold |
| Mutual fund dividend | 10% above Rs 5,000 | 20% + cess, no threshold |
For NRIs in the UK or Singapore, the DTAA caps dividend TDS at 15% — a genuine 5% saving. Submit TRC and Form 10F to the company’s registrar or AMC before the record date.
Professional and Technical Fees — Section 195
NRIs providing professional or technical services to Indian companies face TDS under Section 195:
- Individual NRI: 30% plus cess
- Foreign company: 40% plus cess
There is no Rs 30,000 threshold that applies to resident professionals under Section 194J. The Indian company paying the NRI must deduct TDS on the entire amount.
DTAA can reduce this. For example, if the NRI professional operates from a country with a favorable DTAA and does not have a Permanent Establishment (PE) in India, business profits may not be taxable in India at all under Article 7 of most DTAAs.
EPF — The One Exception
EPF premature withdrawal is the only income type where NRI and resident TDS rates are identical: 10% above Rs 50,000 under Section 192A. This is because EPF is treated as salary-linked income with specific provisions.
However, NRIs must note: once you become an NRI, you cannot contribute to EPF. The existing balance continues to earn interest, but post-retirement interest (after 3 years of non-contribution) may become taxable.
Section 197 Lower TDS Certificate — Step-by-Step
This is the single most effective way to reduce NRI TDS across all income types:
Step 1: Log in to incometax.gov.in. See the NRI income tax login guide if you face access issues.
Step 2: Go to e-File > Income Tax Forms > Form 13.
Step 3: Fill in details:
- PAN and assessment year
- Estimated income from all Indian sources
- Deductions under Chapter VI-A (80C, 80D, etc.)
- Section 24(b) home loan interest deduction
- Tax already paid (advance tax, TDS from other sources)
- Expected tax liability
Step 4: Submit. The Assessing Officer may ask for supporting documents (rent agreement, loan statement, investment proofs).
Step 5: Certificate issued within 2-4 weeks. Download and share with each deductor.
Validity: One financial year. Reapply every April.
Who should apply: Any NRI whose actual tax rate is significantly lower than the TDS rate being deducted — especially NRI landlords and those with large NRO FD balances.
How to Calculate Your Actual NRI Tax Liability
To know your income tax slabs for FY 2026-27, use this framework:
Step 1: Add all Indian income — NRO interest, rent, dividends, capital gains, professional fees.
Step 2: Subtract deductions — Section 80C (Rs 1.5 lakh), Section 80D, Section 24(b), standard deduction on rental income (30%).
Step 3: Apply slab rates under the chosen regime (old or new).
Step 4: Compare actual tax with total TDS deducted.
Step 5: If TDS exceeds actual tax, file ITR and claim refund.
Example Calculation
| Income Source | Amount | TDS Deducted |
|---|---|---|
| NRO FD interest | Rs 2,00,000 | Rs 62,400 (31.2%) |
| Rental income (net of 30% standard deduction) | Rs 3,36,000 | Rs 1,49,760 |
| Dividend | Rs 50,000 | Rs 10,400 (20.8%) |
| Total | Rs 5,86,000 | Rs 2,22,560 |
Under the new tax regime for FY 2026-27, tax on Rs 5,86,000:
- Up to Rs 4,00,000: Nil
- Rs 4,00,001 to Rs 5,86,000: Rs 1,86,000 at 5% = Rs 9,300
- Cess at 4%: Rs 372
- Total tax: Rs 9,672
TDS deducted: Rs 2,22,560. Actual tax: Rs 9,672. Refund due: Rs 2,12,888.
This is why filing ITR is non-negotiable for NRIs.
Checklist for NRIs — Minimize TDS Legally
- Maximize NRE, minimize NRO. NRE interest is tax-free. NRO interest is taxed at 30%.
- Get a Section 197 certificate. Apply through Form 13 every April. Especially critical for rental income.
- Submit TRC and Form 10F for DTAA. Give to your bank, AMC, and tenant before income is paid.
- File ITR every year. Claim refund for excess TDS. Use the ITR filing guide.
- Track Form 26AS and AIS. Verify all TDS credits appear before filing. Mismatch = delayed refund.
- For property transactions: Follow the separate NRI property sale TDS process — it involves Form 15CA and 15CB, which are not required for other income types.