Is NRO Account Taxable? NRO TDS and Tax Rules (2026)

If you're an NRI, the income in your NRO account is taxable in India. That covers interest on the balance and on NRO fixed deposits, and the money you earn in India and keep there, such as rent, dividends or a pension. Your bank deducts tax on the interest before crediting it, at 31.2% for most NRIs, which is usually far more than you actually owe.

You can bring that deduction down in three ways: claim the lower rate in your country's tax treaty with India, get a certificate from the tax department for a lower or nil deduction, or file an Indian tax return and take the excess back. This guide explains how NRO income is taxed, how each route works, and what it means if you live in the US or the UAE, where the same interest is treated very differently at home.

Is NRO account interest taxable? How India taxes NRO income

Yes. Interest on an NRO savings account and on NRO fixed deposits is taxable in India, at the same slab rates as any other income you earn there. Interest on an NRE account, on the other hand, is tax-free while you're a non-resident, which is the main tax difference between the two. Our NRE vs NRO comparison covers the rest.

The other income you keep in an NRO account is taxed as what it is. Rent is taxed as rental income, dividends as dividends and share sales as capital gains. Money you transfer in from abroad isn't income at all, so moving savings from your overseas account into your NRO account doesn't create any Indian tax.

What's different for NRIs is how the tax is collected. Whoever pays you deducts tax at source (TDS) before the money reaches your account, at rates set for non-residents:

Once your total Indian income crosses ₹50 lakh, a surcharge is added and these rates go higher. Our guides on TDS rules for NRIs on interest, rent and capital gains and tax on rental income for NRIs go into each type. The rest of this guide focuses on interest, because that's the deduction everyone with an NRO account pays.

TDS on NRO accounts: 31.2% and why it's usually more than you owe

Your bank deducts 31.2% of your NRO interest as TDS, whatever your actual tax bracket. That's 30% tax plus a 4% health and education cess. Once your Indian income crosses ₹50 lakh a surcharge is added, so the deduction rises to 34.32%, and to 35.88% above ₹1 crore.

There's no minimum either. Residents only see TDS once their interest crosses a yearly threshold, but on an NRO account the bank deducts from the first rupee, on savings interest as well as fixed deposits. On a cumulative FD that pays out only at maturity, the bank still deducts TDS each year as the interest builds up.

Your final tax is worked out on slab rates

The bank deducts at the top rate because it doesn't know what else you earn in India. Your real tax is calculated on your total Indian income for the year at the normal slab rates, and for most NRIs that comes to far less than 31.2%.

Say your only Indian income in FY 2025-26 is ₹5 lakh of NRO FD interest. The bank deducts ₹1,56,000. Under the new tax regime the first ₹4 lakh is tax-free and the next ₹1 lakh is taxed at 5%, so the tax you actually owe is ₹5,200 including cess. NRIs don't get the rebate that makes income up to ₹12 lakh tax-free for residents, but even without it, ₹1,50,800 of what the bank took was never owed.

Why Form 15G and 15H don't work for NRIs

Residents with a low income stop TDS by giving their bank Form 15G or 15H (merged into Form 121 from April 2026). Those declarations are only for residents, so they can't stop the deduction on an NRO account. The bank will also need your PAN on record. Without one, it can't apply a lower rate, and you can't file a return to get the excess back.

How to avoid TDS on your NRO account

There's no form that switches TDS off on an NRO account the way Form 15G does for residents. What you can do is make the bank deduct less, sometimes nothing, and get back what it has already taken. There are three ways to do it, and they work at different points in the year: the first two before the interest is paid, the third after.

Pay the treaty rate with a TRC and Form 10F

If you live in a country that has a tax treaty with India, called a Double Taxation Avoidance Agreement (DTAA), the treaty caps the tax India can charge on your interest. Your bank will deduct at that capped rate instead of 31.2% once you prove where you're a tax resident.

The rates come from the Income Tax Department's DTAA rate table. On ₹5 lakh of interest, the treaty rate cuts the deduction from ₹1,56,000 to ₹75,000 for a US NRI and to ₹62,500 for a UAE NRI.

To get it, give your bank three things:

1. A Tax Residency Certificate (TRC) from the tax authority of the country you live in, covering the period you're claiming for.

2. Form 10F, filed online on the income tax e-filing portal with your PAN. It adds details your TRC may not show, such as your foreign tax ID and address. From April 2026 the same form is called Form 41 under the new Income-tax Act.

3. Your PAN and the bank's own declaration, usually a one-page form confirming you own the interest and have no business presence in India.

Send these before the interest is credited. Banks apply the treaty rate from the date they receive the papers and don't reverse TDS they've already deducted, so anything taken at 31.2% before then comes back only through your tax return. You'll also need a fresh TRC and Form 10F for each April-to-March financial year.

If you live in the US, you request Form 6166 by filing Form 8802 with the IRS. The user fee is $105 for applications from 1 October 2026, and the certificate covers a calendar year, so apply as early in the year as you can.

If you live in the UAE, you apply for a TRC on EmaraTax if you've spent 183 days in the UAE in the past 12 months, or 90 days if you hold a residence permit and have a home or a job there. You pay AED 50 to apply and a processing fee of AED 500 to AED 1,750 once it's approved. A UAE TRC can only cover a current or past period, so check with your bank how it wants the gap at the start of the Indian financial year handled.

The paperwork differs a little by treaty, and our country guides cover each one: the India-US DTAA, India-UAE DTAA, India-UK DTAA and India-Canada DTAA.

Get a lower or nil TDS certificate

If your real tax is below even the treaty rate, as in the ₹5 lakh example above, you can ask the tax department to instruct your bank to deduct less, or nothing at all. You apply online on TRACES with Form 128 (Form 13 until March 2026), giving an estimate of your Indian income for the year and your past returns. If the tax officer agrees, you get a certificate naming your bank, the rate it should deduct and the period it covers, and the bank must follow it.

This route is worth the effort when a large deposit pays interest through the year, because the money stays with you instead of waiting with the tax department for a refund. Apply at the start of the financial year: the certificate usually takes four to six weeks, and it only covers interest paid after it's issued. Our guide on how to apply for a lower TDS certificate as an NRI walks through the application.

Claim a TDS refund through your Indian tax return

Whatever the bank has already deducted above your real tax comes back one way: an Indian income tax return. Your return works out the tax on your total Indian income for the year, and the department refunds the difference between that and the TDS, with interest of 0.5% a month.

1. Check your Form 26AS and Annual Information Statement on the e-filing portal to confirm the bank reported the TDS against your PAN.

2. File ITR-2, the return most NRIs with interest, rent or capital gains use.

3. E-verify the return within 30 days and make sure the account for the refund is pre-validated on the portal.

For FY 2025-26, the deadline was 31 July 2026, but you can still file a belated return until 31 December 2026 and claim the refund. The late fee is ₹1,000 if your total income is up to ₹5 lakh and ₹5,000 above that. An updated return filed after December can't be used to claim a refund at all. Our guide to the TDS refund for NRIs covers the filing in detail.

Which route fits your situation

Most NRIs end up using two of these together: the treaty rate or a certificate to cut the deduction going forward, and a return to recover what was over-deducted before the paperwork reached the bank.

NRO account tax for US and UAE NRIs

Getting the Indian deduction down matters whether you live in the US or the UAE, but for opposite reasons. A US NRI is taxed on NRO interest at home as well and can only offset part of the Indian tax. A UAE NRI pays nothing at home, so whatever India keeps is the final cost.

NRO interest for US NRIs

If you're a US citizen, green card holder or US tax resident, the US taxes your worldwide income, so NRO interest is taxable in the US as ordinary income. You report it on Schedule B of Form 1040, converted to dollars, and you can usually claim the Indian tax as a foreign tax credit on Form 1116.

The catch is how much of that Indian tax counts. The IRS only allows a credit for tax you were legally required to pay, which means your actual Indian liability, capped at the 15% treaty rate. Anything the bank deducted above that is treated as a voluntary payment, so the US won't credit it and you have to claim it back from India. Without the treaty paperwork or a refund, the extra 16% or more is simply lost.

Your NRO account also counts towards your US reporting. If your foreign accounts together go above USD 10,000 at any point in the year, you file an FBAR, and larger balances can mean Form 8938 too. Our guide on FATCA and CRS reporting for NRIs covers both. UK and Canadian residents are in a similar position: the interest is taxable at home, and Indian tax is credited only up to the 15% treaty rate.

NRO interest for UAE NRIs

The UAE doesn't tax individuals on personal income such as bank interest, so NRO interest is taxed only in India. That makes the Indian deduction your whole cost, with no home tax to offset it against. At 31.2%, a UAE NRI loses almost a third of the interest; with a TRC and Form 10F, the cap is 12.5%; and if your Indian income is small, a lower TDS certificate or a refund can bring it close to nil.

It also changes where your money is best kept. NRE interest is tax-free in India and in the UAE, so for a UAE NRI the NRO account is mainly for money earned in India. Once tax on it is paid, you can move it to your NRE account within the USD 1 million a year allowed out of NRO, and the interest it earns from then on is tax-free. Our guide to tax on FD interest for NRIs compares NRE, NRO and FCNR deposits side by side.

Filing an Indian tax return for NRO income

You have to file an Indian return if your total Indian income for the year is above the tax-free limit, which is ₹4 lakh under the new tax regime and ₹2.5 lakh under the old one. Even below that, file whenever the bank has deducted more than your real tax, because the return is the only way to get the excess back. Our guide on whether US NRIs need to file ITR in India covers the rules and deadlines in more detail.

NRO account tax slabs under the new and old regimes

NRO interest is added to your other Indian income and taxed at slab rates. The new regime applies unless you choose the old one when you file, and these slabs apply for FY 2025-26 and FY 2026-27:

A 4% cess is added to the tax, and NRIs can't claim the rebate that wipes out tax on income up to ₹12 lakh for residents. Our guide on the new vs old tax regime for NRIs shows when the old regime works out cheaper.

Deductions that lower tax on NRO income

Deductions only help under the old regime, so they're worth adding up before you pick one. Three are relevant to most NRIs with an NRO account:

• Savings interest: up to ₹10,000 a year of interest on savings accounts, including your NRO savings account. FD interest doesn't count.

• Investments and payments under Section 80C: up to ₹1.5 lakh for life insurance premiums, ELSS mutual funds, your children's tuition fees in India and home loan principal. Some 80C options, such as opening a new PPF account, aren't available to NRIs.

• Health insurance: premiums on a policy covering you or your family in India.

These reduce your final tax, not the TDS. The bank still deducts at 31.2% or the treaty rate, and the deductions show up as a bigger refund.

Check your PAN status before you file

NRIs don't have to link PAN with Aadhaar, but many found their PAN marked inoperative anyway because the tax department hadn't recorded them as non-resident. An inoperative PAN holds up refunds, which defeats the point of filing. Check that your PAN shows non-resident status before you file; our guide on updating your PAN after becoming an NRI explains how. Then compare the TDS in your Form 26AS and AIS with your bank's TDS certificates, since a mismatch is the most common reason refunds are delayed.

Moving NRO money abroad after tax

You can send up to USD 1 million a financial year out of your NRO account, once the tax on it has been paid. Before it goes, your bank asks for Form 145 (Form 15CA until March 2026), your declaration of the remittance. For amounts above ₹5 lakh in a year, it also asks for Form 146 (formerly Form 15CB), a chartered accountant's certificate that the tax has been dealt with.

The same USD 1 million covers transfers from NRO to NRE, so moving taxed money into your NRE account uses up part of the limit. Our guide on transferring money from an NRO account to the US walks through the forms and what the bank checks.

NRO account tax: questions NRIs ask

Under which section is NRO interest taxed?

NRO interest is taxed as income from other sources at your slab rates. The bank deducts TDS under section 195 of the Income-tax Act, 1961 for interest paid up to 31 March 2026, and under section 393(2) of the Income-tax Act, 2025 from 1 April 2026. Treaty relief sits in section 90 of the old Act and section 159 of the new one.

Can I claim the treaty rate for a year when I didn't give my bank a TRC?

Yes, in your tax return, as long as you have a TRC and Form 10F covering that year. The bank won't revisit TDS it has already deducted, but your return can calculate tax on the interest at the treaty rate, or at your slab rate if that's lower, and the excess is refunded.

Is NRO interest still taxable after I return to India?

Yes, interest on rupee deposits is taxable whether you're a resident or not. What changes is the TDS. Once you return to live in India, your bank redesignates the NRO account as a resident account, and from then on resident rules apply: TDS only above the yearly threshold, and Form 15G or 15H if your income is low. The treaty rate stops applying once you're no longer a tax resident abroad. Our guides on converting NRI accounts to resident accounts and working out your RNOR status cover the change.

How is a joint NRO account with a resident parent taxed?

The interest is taxed in the hands of the person whose money is in the account, regardless of whose name comes second. Banks usually deduct TDS based on the first holder, so if you're the first holder, expect 31.2% even if part of the money is your parent's. Keep a record of who contributed what, because that decides who reports the interest.

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