Non-Resident Indians (NRIs) facing a flat 30% TDS on rental and NRO interest can manage cash flow by applying for lower deduction certificates. Alternatively, those with income below tax exemption limits can secure a full refund by filing an annual Income Tax Return, recovering the excess tax withheld by the government.
Non-Resident Indians (NRIs) dealing with income in India often face a standard 30 percent Tax Deducted at Source (TDS) on earnings like rent and interest from Non-Resident Ordinary (NRO) accounts. This applies under Section 393 of the Income Tax Act, 2025, regardless of how small the transaction amount is. Unlike resident taxpayers, NRIs do not benefit from an exemption threshold for these specific deductions, which can lead to a significant immediate reduction in available cash.
To manage this, NRIs can explore applying for a certificate for lower or nil deduction of tax under Section 395 of the Income Tax Act, 2025. By submitting an application to the income tax authorities, taxpayers may be granted a lower TDS rate, sometimes as low as 0.10 percent. This process allows for better cash flow management, though it requires administrative effort. Taxpayers should consider the time and costs involved in this application process versus the actual tax savings they expect to gain.
For NRIs whose total annual taxable income in India remains below the basic exemption limit, the 30 percent TDS often results in an overpayment of tax. In such cases, the government essentially holds the excess funds until the taxpayer acts. NRIs can recover this money by filing an online Income Tax Return. This process allows them to reconcile their final tax liability against the amounts already withheld by financial institutions or tenants. Once the return is processed and the required documentation is verified, the excess amount is credited back to the taxpayer's bank account.