Why TDS Is Deducted from NRI Income
By law, TDS on NRI income is deducted at higher rates because NRIs fall under special tax rules under the Income Tax Act 1961.
Common TDS deduction areas
- NRO account interest: 30 percent
- Rent paid to NRI landlords: 30 percent
- Sale of property by NRI sellers: 20 percent to 30 percent
- Short term capital gains on equities: 15 percent
- Long term capital gains: 10 percent
- Dividend income: 20 percent
Most NRIs do not realise that even if their final tax liability is lower, the TDS is deducted at fixed high rates.
NRIs can claim a full or partial TDS refund by filing ITR for AY 2025 26, even if no tax is actually payable.
When NRIs Can Claim a TDS Refund
You are eligible for a TDS refund if:
- TDS deducted is more than your final tax payable
- Your actual taxable income is lower
- You incurred capital losses
- You qualify for DTAA tax relief
- You sold a property at a loss or low profit
- You earned NRO interest but had no taxable income
- You paid tax twice (India + foreign country)
Documents Required for NRI TDS Refund
You must prepare the following before filing:
PAN card | Passport details for residency calculation | Form 26AS | AIS (Annual Information Statement) | TDS certificates | NRO bank statement | Rent receipts (if applicable) | Property sale deed (if applicable) | Form 16A from tenants or banks | Capital gains statements
Step by Step Process for NRIs to Claim TDS Refund in 2026
The refund process follows the rules of AY 2025 26.
Step 1: Check TDS Entries in Form 26AS and AIS
Form 26AS shows:
- TDS deducted
- TCS
- Tax payments
AIS shows:
- High value transactions
- Rent received
- Mutual fund redemptions
- Property transactions
- Interest income
Refund processing is delayed if even one entry in AIS is mismatched. Always reconcile both.
Step 2: Determine Your Residential Status
Your tax treatment depends on:
- NRI
- RNOR
- Resident
Residency under Section 6 must be computed correctly.
Step 3: Calculate Final Tax Liability
Depending on your income sources:
- NRO interest
- Rent
- Capital gains
- Business income
- Dividend income
If the TDS deducted is higher than your final tax, you are due for a refund.
Step 4: Apply DTAA Benefits
Under Double Taxation Avoidance Agreements, you can claim:
- Reduced TDS rates
- Tax credits
- Exemptions on specific income types
Step 5: File ITR 2 or ITR 3
You must file:
- ITR 2 for most NRI incomes
- ITR 3 for business or professional income
Claim your refund in the return.
Step 6: E Verify Your Return
Refunds are not processed unless the ITR is verified within the allowed timeline.
Verification methods:
- Aadhaar OTP
- Net banking
- Bank demat account
- EVC
Step 7: Refund Issued to Your Bank Account
Refunds are credited to:
- Your NRE account
- Your NRO account
- Your domestic savings account (rare, case specific)
The refund status can be tracked on the Income Tax portal.
Timelines for NRI TDS Refunds
Average NRI refund timelines
- Normal refund: 30 to 90 days
- Large refund amounts: 60 to 120 days
- Mismatched AIS cases: Up to 6 months
- Non verified ITR: Refund will not start processing
- Common Reasons for NRI TDS Refund Delays
- AIS mismatches
- Failure to verify return
- Wrong bank details
- Wrong ITR form
- Incorrect DTAA application
- Not reporting capital gains properly
- Missing TDS certificates
- Property transactions without supporting documents
How NRIHelpLine Helps NRIs Recover TDS Refunds Faster
NRIHelpLine specialises in TDS refund cases involving:
- NRO FD interest
- Rent from property
- Sale of residential property
- Shares and mutual funds
- Dividend income
- DTAA claims
- Complex refund situations
You get:
- AIS and Form 26AS reconciliation
- Correct ITR form selection
- Capital gains calculation
- DTAA relief application
- Faster refund processing
- Dispute resolution support
FAQs
Q. Can NRIs claim a refund of excess TDS deducted?
Q. Is TDS deducted on NRO FDs refundable?
Q. How long does it take for NRIs to get refunds?
Q. Can NRIs get refund on property sale TDS?
Q. Can NRIs claim DTAA tax relief?
Q. Which ITR form is required for NRI refund?
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Expert’s Note
Many NRIs lose thousands because they do not reconcile Form 26AS and AIS before filing. Refunds get delayed if TDS entries do not match.
Sanjeev Sharma (Advocate – NRI HelpLine Tax & Property Law Specialist)
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