{"id":17031,"date":"2026-08-03T07:13:46","date_gmt":"2026-08-03T07:13:46","guid":{"rendered":"https:\/\/www.msassociates.pro\/articles\/?p=17031"},"modified":"2026-08-04T07:47:31","modified_gmt":"2026-08-04T07:47:31","slug":"can-nris-claim-dtaa-relief-on-indian-income","status":"publish","type":"post","link":"https:\/\/www.msassociates.pro\/articles\/can-nris-claim-dtaa-relief-on-indian-income\/","title":{"rendered":"Can NRIs Claim DTAA Relief on Indian Income? Yes, They Can – Learn How"},"content":{"rendered":"

You moved to Dubai (or the UK or the US) five years ago. Before leaving India, you deposited part of your savings in an NRO fixed deposit account<\/strong>. Every quarter, the interest is credited to your account.<\/p>\n

All sounds good! Isn’t it?<\/p>\n

Then you notice something painful<\/strong> in your bank statement. Nearly a third of that interest<\/strong> has been deducted. You call the bank, and someone casually tells you that they have deducted TDS at around 30%<\/strong>. It almost sounds like there is no other option.<\/p>\n

Here’s the question worth asking at that exact moment. Is that really the tax you are supposed to pay, or is it simply the rate the bank applies because it has not been given the documents needed to apply the DTAA?<\/p><\/blockquote>\n

For a large number of NRIs, the honest answer is the second one, and the good news is that<\/strong>, if you’re eligible, the DTAA may allow tax to be deducted at a lower rate<\/strong>.<\/p>\n

So, the answer is YES – an NRI can claim DTAA relief on eligible Indian income, as long as India has a tax treaty with the country where the NRI is a tax resident, and certain conditions are met<\/a>.<\/div>\n

In this article, we’ll look at why India taxes you in the first place even though you’ve moved abroad. We’ll also find out how the DTAA actually lowers the tax rate. We’ll list the paperwork required that will help you in lowering the rate<\/strong> from a theory into a reality.<\/p>\n

Why India even taxes you<\/h2>\n

Fair question. India taxes income based on where it is earned, not where you are sitting when you earn it.<\/strong><\/p>\n

Interest on an NRO deposit, dividends from Indian shares, royalties and several other types of income earned in India – all of this is “sourced” in India. Hence, India gets first claim on taxing it, regardless of your passport or your postal address.<\/p><\/blockquote>\n

The complication is that Dubai, or the UK, or the US, wherever you now live, might also want a share, because most countries tax their residents<\/strong> on worldwide income. So the same interest income can, in theory, get taxed twice: once by India at the source, and once by your country of residence because you are a tax resident there.<\/p>\n

That’s double taxation. And that\u2019s where DTAAs come up.<\/p>\n

What does the DTAA actually do for you<\/h2>\n

A Double Taxation Avoidance Agreement (DTAA) helps ensure that the same income is not taxed twice<\/strong> – once in India and again in your country of residence.<\/p>\n

In many cases, it also allows tax to be withheld in India at a lower treaty rate. But this benefit is available only if you satisfy the conditions<\/strong> of the applicable DTAA and submit the required documents<\/strong>.<\/p>\n

For example, interest earned on an NRO account is usually subject to tax deduction at the rate prescribed under the Income-tax Act. However, if India has a DTAA with your country of residence, the tax may be withheld at a lower treaty rate<\/strong>, provided you meet the treaty conditions and submit the prescribed documents.<\/p>\n

The actual rate depends on the DTAA between India and your country of residence, as each treaty has its own tax rates, conditions and scope.<\/p><\/blockquote>\n

Choosing the More Beneficial Tax Provision<\/h4>\n

This benefit is available under Section 90(2) of the Income-tax Act, 1961<\/strong> (now reflected under Section 159 of the Income Tax Act, 2025). It states that if both the Income-tax Act and a DTAA apply, then you can choose the provision that is more beneficial<\/strong> to you.<\/p>\n

Other Benefits of the DTAA<\/h4>\n

In many cases, involving interest, dividends, royalties and certain other types of income, claiming DTAA benefits<\/strong><\/a> can significantly reduce the amount of tax deducted at source<\/strong>. But this does not apply to every type of income. As indicated above, you must meet the eligibility conditions<\/strong> and submit the required documents.<\/p>\n

Foreign Tax Credit (FTC)<\/h4>\n

Even where tax is deducted in India, it may not necessarily mean you end up paying tax twice. In many cases, the tax paid in India can be claimed as a Foreign Tax Credit (FTC)<\/strong> in your country of residence, subject to the domestic tax laws there and the provisions of the applicable DTAA. This helps reduce or eliminate double taxation on the same income.<\/p>\n

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How to avoid higher rate of withholding tax in the source country – Required Documents?<\/h2>\n

So why does the bank continue to deduct tax at the higher rate? Quite simply, because it cannot assume<\/strong> that you are eligible for DTAA benefits. Unless you submit the required documents<\/strong> and satisfy the treaty conditions, the bank (or any other payer) must deduct tax at the rate prescribed under the Income-tax Act.<\/p>\n<\/div>\n

If you want tax to be deducted at the lower DTAA rate instead of the higher domestic rate, you should submit these documents before the payment is made<\/strong>. These generally include:<\/p>\n