How this is worked out
Two different numbers matter on NRO interest. The first is what your bank deducts before it pays you a rupee. The second is what you actually owe once the interest is added to your other Indian income. For most people living abroad the second is far smaller than the first, and the difference sits with the tax department until you file.
Why the bank deducts more than you actually owe
A bank paying interest to a non-resident must deduct tax at source. 2025 Act s. 393(2) Table Sl. 17was s. 195 It can’t see your other income or your basic exemption, so it deducts at the flat non-resident rate — 30% plus 4% cess, and surcharge once the interest paid in the year passes the first surcharge band — on every rupee, from the first one. There’s no threshold below which it can stop, and no declaration that lets a non-resident opt out the way a resident can.
Your real tax works differently. The interest is added to your other Indian income and taxed at slab rates under the new (default) regime, with income up to ₹4,00,000 taxed at nil. What the interest alone adds to your bill is the difference between the tax on your total income and the tax on your other income by itself — usually much less than the bank held back, unless your total Indian income is already high. The new-regime rebate that leaves many residents with no tax (s. 156 of the 2025 Act) is for residents only, so it isn’t in this estimate.
Capital gains and dividends are taxed separately, at their own rates. A resident can set unused slab room against gains, but a non-resident can’t, so the interest is taxed at slab rates from zero, whatever your gains. 2025 Act s. 197was s. 112 Gains and dividends still count toward the surcharge band, which is all the estimator uses them for.
Treaty rates and the lower-deduction certificate
If your bank has your tax residency certificate and treaty form, it may deduct at your treaty’s rate on interest instead — for example 15% under the India–UK treaty or 12.5% under the India–UAE treaty — but only when that rate is lower than the Act’s. 2025 Act s. 159was s. 90 Enter it in the treaty field and the estimator applies the same lower-of-the-two test the Act does, both to what the bank deducts and to what you actually owe. Check your own country’s rate, and seven others, in the DTAA rate lookup.
A lower or nil deduction certificate, applied for on TRACES, works the other way: it tells the bank to deduct closer to your real tax from the start, instead of the full rate. 2025 Act s. 395(1)was s. 197 It changes only what the bank deducts, not what you owe, so it has its own field: enter the certificate’s rate there, not in the treaty field.
What the estimator leaves out
Assumptions
- You’re a non-resident for the whole of tax year 2026-27. In the year you move, part of the year can be taxed differently; check your status first.
- New regime only, which allows almost no Chapter VIII deductions for anyone (s. 202(2) of the 2025 Act); the estimator applies none.
- “Other Indian income” means income taxed at slab rates. Capital gains and dividends go in their own field and only set the surcharge band. If they take your total into a surcharge band, the result is approximate: it leaves out any extra surcharge the interest causes on the tax on your gains, and marginal relief. The estimator says so when it happens.
- The bank’s surcharge is tested on the interest it pays you; your own surcharge is tested on your total Indian income. These can fall in different bands even when the thresholds match.
- A treaty rate is applied flat, without surcharge or cess, both to the deduction and as a cap on the tax on the interest. Whether cess sits on top of a treaty rate is a grey area in practice (some tribunals have held that cess can’t be added to a treaty rate). This estimator applies the treaty rate flat; if your bank adds cess, it deducts that rate plus 4% of it.
- A certificate rate is applied flat to the whole year’s interest, as the certificate states it, and changes only the deduction.
- Tax on your other income is assumed to be settled separately, through its own TDS or with your return. The refund shown here is only the NRO-interest part of the picture.
What to do with your result
If a large amount is held back every year, a lower-deduction certificate usually helps more than anything else here: it reduces what’s held back at source rather than making you wait for a refund. Either way, the money isn’t lost — you claim it back by filing your return for tax year 2026-27 by 31 July 2027, and the department adds 0.5% a month if you file on time. Our guide to TDS on NRO interest walks through the certificate, the treaty route and filing step by step. Our other calculators cover the rest of an NRI’s Indian tax.
When to get a chartered accountant
- If your NRO interest and other Indian income together are large enough to reach a surcharge band, on either side of this estimate.
- If you have capital gains or dividends and your total Indian income reaches a surcharge band: the extra surcharge on the gains, and marginal relief, need working out in full.
- If your bank won’t apply a treaty rate you believe you’re entitled to, or disagrees on cess.
- If you changed residency status during the tax year, or your NRO accounts weren’t redesignated on time.