What is the TDS Rate on Interest Earned in NRO Accounts?

One distinction that helped me was separating the TDS rate from the final tax rate.

The bank deducts tax when interest is credited or paid according to the applicable withholding provisions. Under the current framework, the Income Tax Department says the TDS provisions were reorganized under Section 393 of the Income-tax Act, 2025 from 1 April 2026, while the rates were largely retained.

For a non-resident's ordinary taxable interest, the domestic base rate can be 30%, with surcharge and cess potentially affecting the amount actually withheld.

But if a DTAA applies, treaty provisions can affect the tax rate, subject to the treaty's conditions and the documentation required.

Also, don't assume that an NRO FD and NRO savings account are treated as tax-free just because they are both bank deposits. NRO interest is generally taxable.

If your bank's TDS looks unusually high or low, ask them for the TDS rate and section/table reference used for the deduction. That gives you something specific to verify rather than just looking at the amount deducted.

I had the same confusion because my bank deducted a little more than 30%.

The explanation I received was that the applicable withholding can include surcharge and health and education cess, depending on the circumstances.

The other thing I learned is that DTAA treatment needs to be considered separately.

Being an NRI doesn't automatically mean every NRO interest payment gets the treaty rate. You generally need to establish treaty eligibility and provide the documentation the bank requires.

My bank asked for my tax residency information and supporting documents before considering treaty benefits.

In my case, the bank deducted tax from both my NRO savings interest and NRO FD interest.

The important thing is that NRO interest is taxable in India. I initially confused it with NRE interest, which generally has an exemption when the relevant FEMA conditions are satisfied.

For NRO interest, the bank generally deducts tax at the applicable rate for a non-resident. The commonly quoted base rate is 30%, before applicable surcharge and health and education cess.

So when people say "30.9%" or "31.2%", they're usually talking about the effective rate after adding cess and, in some cases, surcharge—not a separate basic TDS rate.

I also wouldn't assume that the TDS deducted by the bank is necessarily your final tax liability. TDS is a withholding mechanism. Your final tax position can depend on your total taxable income, applicable provisions, and whether a tax treaty applies.

If you're resident in the UK for tax purposes, I'd check the India-UK DTAA rather than relying on a general NRO tax article.

All the income that you will earn as an NRI is applicable for tax as per Indian laws, TDS of 30%. All incomes are subject to paying surcharges and cess, and if your income exceeds INR 10 lakhs, then a surcharge of 10% will be applicable on TDS.

Under Section 195 of the Income Tax Act 1961, to deduct tax Source of the income of an NRI. The TDS rate is declared in the Finance Act. which is, On the interest earned up to INR 10 lakhs, TDS will be 30.90%, and the interest earned beyond INR 10 lakhs the the TDS is 33.99% with surcharges and cess. But the TDS is subject to the Double Taxation Avoidance Agreement (DTAA).