Tax Deducted at Source (TDS) for NRIs: What It Is and How to Get It Refunded

Non-Resident Indians (NRIs) often face Tax Deducted at Source (TDS) on various India-source incomes—from NRO account interest to rental receipts and capital gains. While TDS ensures tax compliance, it can sometimes be higher than your actual liability. This guide walks you through everything you need to know about TDS as an NRI and shows you exactly how to claim a refund of any excess deductions in the 2025 filing season.

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1. What Is TDS and Why NRIs Are Affected

Tax Deducted at Source (TDS) is a mechanism where the payer (bank, tenant, broker) withholds tax before crediting your payment. For NRIs, common TDS scenarios include:

• NRO account interest: 30% TDS by banks
  
• Rental income: 30% TDS by tenants or collection agents
  
• Capital gains: 15% TDS on long-term gains for listed securities, 10% on others
  
• Dividend income: 20% plus surcharge and cess (no dividend distribution tax)
  
• Professional fees or technical services: 10–15% under DTAA rates
  

Why it matters: You may have deductions exceeding your slab rate or treaty rate, leading to excess TDS which you can—and should—claim back.

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2. How to Verify Your TDS Deducted

1. Download Form 26AS:
   
   • Log in to the Income-tax e-filing portal → My Account → View Form 26AS.
     
2. Check TDS Entries:
   
   • Under Part C – TDS/TCS, confirm:
     
     • Deductor TAN (e.g., your bank’s TAN)
       
     • Challan number
       
     • Amount deducted and date
       
3. Match with Certificates:
   
   • For banks, use Form 16A or bank TDS certificate.
     
   • For tenants, request Form 16A or rent TDS certificate.
     

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3. When You’re Owed a Refund

You qualify for a TDS refund if actual tax liability < TDS deducted, typically because:

• Allowable deductions/exemptions (80C, 80TTA on interest, municipal taxes on rent) lower your taxable income.
  
• DTAA benefits allow you to apply a lower withholding rate—bank used 30% but treaty rate is 15%.
  
• Slab rate for individuals (up to 30% plus surcharge/cess) is lower than flat TDS rates on certain incomes.
  

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4. Step-by-Step: How to Claim Your TDS Refund

Step 1: Compute Your True Tax Liability

• Aggregate Income: Salary (if any), NRO interest, rental, capital gains.
  
• Deduct Exemptions: Section 80C, 80TTA, standard deduction on rental (30% and municipal taxes).
  
• Calculate Tax: Apply NRI slab rates; add surcharge and cess.
  

Step 2: Choose the Correct ITR Form

• ITR-2: For salary, interest, rental, gains, and DTAA claims.
  
• ITR-3: If you have business or professional income.
  

Step 3: Fill TDS Details in ITR

• Schedule TDS2 (Other Sources): Enter your bank/tenant TDS details exactly as per Form 26AS.
  
• Schedule CG (Capital Gains): TDS on gains under Sections 112A/112.
  
• Schedule IT (Tax Paid): The system calculates refundable TDS automatically.
  

Step 4: Submit & E-Verify

• Submit ITR: Note acknowledgement number.
  
• E-Verify: Via Aadhaar OTP, net banking, or bank ATM within 30 days.
  

Step 5: Track Your Refund

• e-Filing Portal: e-File → Refund/Demand Status → Enter PAN & AY.
  
• Bank Account: Refund credited to your Indian bank account (ensure correct IFSC).
  

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5. Common Pitfalls & How to Avoid Them

Pitfall	Solution
Mismatch in Form 26AS vs Form 16A	Request your bank/tenant to correct entries before filing
Wrong ITR form	Use ITR-2/ITR-3 only; avoid ITR-1/ITR-4 for NRI incomes
Incorrect bank details	Double-check account number & IFSC in your ITR
Missing e-verification	Complete immediately after filing; else your return stays pending
Overlooking DTAA lower rates	File Form 67 by July 24 to claim treaty-based TDS relief

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6. How Taxsure.ai Streamlines Your TDS Refund

• Auto-Populate TDS Data: Pulls Form 26AS entries directly into your ITR.
  
• Real-Time Tax Calculator: Shows your actual liability vs. TDS paid.
  
• Guided Filing Flow: Step-by-step prompts for deductions and TDS schedules.
  
• Deadline Alerts: Never miss ITR or e-verification deadlines.
  
• Expert Review: Optional CA check ensures accurate refund claims.
  

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Final Takeaway & Call to Action

Don’t let excess TDS eat into your returns. By verifying your deductions, choosing the right ITR form, and following the refund process diligently, you can reclaim every rupee you’re owed. And with Taxsure.ai, the entire workflow—from TDS import to ITR filing and refund tracking—becomes fully automated, precise, and stress-free.

Ready to recover your TDS?
Visit Taxsure.ai today and claim your full refund with confidence!

How to Save Tax in India Legally as an Non-Resident Indians (NRIs)?
Non-Resident Indians (NRIs) can often feel that Indian taxes eat into their hard-earned money twice—once abroad and once back home. Yet, the Indian tax code provides multiple legal avenues to minimize your India tax liability. This guide walks you through the most effective, fully compliant strategies to save tax in 2025.

1. Leverage Exempt Interest on NRE & FCNR Accounts

Why it helps: Section 10(4)(ii) and 10(15)(vii) of the Income-tax Act fully exempt interest on NRE and FCNR (foreign-currency) deposits.

• Action:
  
  • Park surplus funds in NRE or FCNR fixed deposits.
    
  • Declare this exempt interest under Schedule EI (Exempt Income) in your ITR—no tax, no paperwork.
    

Result: 100% of interest earned stays in your pocket, tax-free.

2. Claim Foreign-Tax Credit under DTAA

Why it helps: If you earn India-source income (e.g., NRO interest or rent) and pay tax abroad (via TDS under DTAA), you can offset that against your Indian tax bill.

• Action:
  
  1. Obtain a Tax Residency Certificate (TRC) from the IRS (Form 6166) or CRA (T2209).
     
  2. File Form 67 on the Income-tax portal before submitting your ITR.
     
  3. In Schedule FTC (Foreign Tax Credit) of ITR-2/ITR-3, enter your Form 67 acknowledgment.
     

Result: You pay the higher of the two tax rates—but never both in full.

3. Maximize Chapter VI-A Deductions (Sections 80C, 80D, 80E, 80G)

Even as an NRI, you’re eligible for many popular deductions under Chapter VI-A:

Section	What It Covers	Max Deduction (₹)
80C	Life insurance premium, ELSS mutual funds, 5-yr bank FDs, ULIPs	1,50,000
80D	Health insurance premium (self, family, parents)	25,000 (50,000 for senior parents)
80E	Education loan interest	Unlimited (for 8 yrs)
80G	Donations to notified charities	50% or 100% of amount

• 
  Action:
  
  • Invest in ELSS (Equity Linked Savings Schemes) or 5-year tax-saving FDs before March 31.
    
  • Pay health-insurance premiums for yourself and your parents.
    
  • Service outstanding education loans.
    
  • Donate to Indian registered NGOs.
    

Result: Slash up to ₹2–3 lakh from your taxable income each year.

4. Optimize Home-Loan Deductions

If you own or purchase Indian property, home-loan benefits can be substantial:

• Interest Deduction (Section 24b):
  
  • ₹2 lakh per year on self-occupied property
    
  • Unlimited on let-out property (subject to loss rules)
    
• Principal Repayment (Section 80C):
  
  • Counts toward your ₹1.5 lakh 80C limit
    
• Action:
  
  • Ensure timely EMI payments before March 31.
    
  • Collect and declare Form 16B (TDS on property purchase) and lender’s interest certificates.
    

Result: Save up to ₹3.5 lakh per property annually.

5. Create & Utilize an HUF (Hindu Undivided Family) Structure

Why: Income splitting through an HUF can reduce your individual tax bracket.

• Action:
  
  1. Constitute an HUF with a legal karta (often the eldest male).
     
  2. Transfer ancestral or gifted assets into the HUF.
     
  3. Generate rental or investment income under the HUF’s PAN.
     

Result: Each member enjoys a separate ₹2.5 lakh basic exemption—doubling or tripling your combined tax-free thresholds.

6. Plan Salary Components & Allowances

If you receive India-based salary (e.g., Indian subsidiary assignment):

• Structure components to include:
  
  • House-rent allowance (HRA)
    
  • Leave travel allowance (LTA)
    
  • Meal vouchers, telephone, and other exemptions
    
• Action:
  
  • Negotiate a tax-efficient salary package with your employer.
    
  • Provide accurate rent receipts and travel proofs.
    

Result: Convert taxable salary into partly exempt allowances—saving 10–20% tax.

7. Use Tax-Efficient Investments & Bonds

• Infrastructure Bonds (80CCF):
  
  • Deduction for investments in government infrastructure bonds (where available).
    
• NPS Tier I (80CCD):
  
  • Additional ₹50,000 deduction for National Pension System contributions.
    
• Action:
  
  • Subscribe to NPS and approved infrastructure bonds before the deadline.
    

Result: Gain extra ₹50,000–₹1 lakh in deductions beyond 80C.

8. Avoid Common Pitfalls

• Don’t mix NRE & NRO:
  
  • Transfer Indian earnings only via NRO; park savings in NRE.
    
• File Form 67 on time:
  
  • Miss it, and you lose foreign tax credits.
    
• Choose the correct ITR form:
  
  • ITR-2 for investors, ITR-3 for professionals.
    
• Disclose all incomes:
  

Declare exempt and taxable incomes properly—don’t skip Schedule EI or OS.

9. How Taxsure.ai Makes It Effortless

• Automated Deduction Calculator: Picks highest-value Chapter VI-A options.
  
• Smart Form Selector: Guides you to ITR-2/ITR-3 based on your profile.
  
• Form 67 Wizard & DTAA Claims: Integrated flows for foreign-tax credit.
  
• Real-Time Validation: Flags missed exemptions, deadlines, and reporting gaps.
  

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Final Call to Action

Saving tax legally as an NRI doesn’t require endless spreadsheets or expert fees—just a clear strategy and the right tools. With Taxsure.ai, your deductions, exemptions, and treaty benefits are maximized automatically, so you keep more of your money and stay fully compliant.

Start saving today:
Visit Taxsure.ai and transform your 2025 filing season into your most tax-efficient yet.