How NRIs Can Claim Excess TDS Deducted by Banks
A client once called us after selling her flat in Pune.
The buyer had deducted TDS on the full sale value of Rs 85 lakh. Her actual capital gains tax was a fraction of that. The property had been held for over 20 years.
She had no idea she was entitled to claim the excess back.
This is not unusual. Banks deduct TDS on NRO interest at 30% regardless of your actual tax bracket. Buyers deduct TDS on property sales based on the full sale value, not your gain. Tenants sometimes deduct more than required.
In every one of these cases, the money is recoverable.
Filing your Income Tax Return (ITR) is the only legal mechanism for NRIs to claim a TDS refund. (Source: NRIHelpline)
This guide walks you through exactly how to do it.
Why NRIs Routinely Overpay TDS
TDS rates for NRIs are applied on gross income, not on actual tax liability.
Your bank does not know your total income for the year. It does not know your eligible deductions or your DTAA entitlements. So it deducts at the maximum applicable rate and deposits it with the government.
The most common situations where excess TDS is deducted:
NRO account interest.
Banks deduct TDS at 30% on all NRO interest. (Source: Bachhat Money)
Under the new tax regime, the basic exemption limit is Rs 4 lakh. If your total India income stays below that, the entire TDS deducted is refundable.
Property sale proceeds.
The buyer deducts TDS on the gross sale value. Your actual capital gain is almost always lower than the full sale value. For property held over 24 months, the LTCG tax may be far below the TDS withheld. (Source: Thane Real Estate News)
Rental income.
TDS on rent paid to NRIs applies at 31.2% from the first rupee under Section 195. After standard deductions, your actual tax liability may be lower.
DTAA-eligible income.
India has Double Taxation Avoidance Agreements with over 90 countries. If DTAA entitled you to a lower rate but the payer used the standard rate, the excess is refundable.
👉 Our article on how to avoid double taxation as an NRI explains DTAA claims in detail.
The Only Way to Get It Back: File Your ITR
There is no shortcut.
You can recover excess TDS only through ITR filing. There is no alternative mechanism for NRIs to claim refunds. (Source: NRIHelpline)
You cannot write to the bank asking for a refund. The bank has already deposited the tax with the government. The refund flows through the Income Tax Department. Filing your ITR is the only path to access it.
This applies even if your income was fully taxed at source. It applies even if your total India income falls below the taxable limit.
👉 Our guide on whether NRIs need to file ITR with no income in India covers the cases where filing still makes sense purely for refunds.
Step-by-Step: How to Claim the Refund
Step 1: Collect All TDS Certificates and Cross-Check Form 26AS
Before filing, gather:
Form 16A from each bank for NRO interest
Form 16B from the buyer for property sale TDS
Form 16C from tenants for rental TDS
Form 26AS from the income tax portal
Annual Information Statement from incometax.gov.in
Cross-check every TDS entry in Form 26AS against the certificates you have collected. Only claim TDS amounts visible in Form 26AS. Mismatches trigger system alerts and delay refunds. (Source: Investmates)
If TDS was deducted but is not in Form 26AS, the deductor has not yet filed their return. Follow up with them before filing your ITR.
Step 2: Determine the Correct ITR Form
Most NRIs file ITR-2. This form covers salary income, capital gains, house property income, and income from other sources including NRO interest.
If you have business or professional income in India, you would need ITR-3.
Filing the wrong ITR form results in a defective return notice. (Source: Investmates)
Step 3: Compute Your Actual Tax Liability
This is where the refund is calculated.
Report all your India-sourced income in the ITR. Apply eligible deductions under Chapter VI-A of the Income Tax Act, including Sections 80C, 80D, and others applicable to NRIs.
Your actual tax liability may be well below the TDS already deducted, especially if:
Your total India income falls below the basic exemption limit
You qualify for deductions that reduce taxable income
Your LTCG on property is far lower than the TDS withheld on the full sale value
DTAA provisions entitle you to tax relief
The difference between TDS already deducted and your actual tax liability is what gets refunded.
Step 4: Claim the Refund in Your ITR
Once your tax computation is complete, the ITR form automatically calculates the refund.
The refund amount appears in the summary section of the ITR. Verify your pre-validated bank account details are correct. Refunds are credited only to a pre-validated Indian bank account in your own name. (Source: Investmates)
Step 5: File, E-Verify, and Track
Submit the ITR on incometax.gov.in. E-verify within 30 days of filing.
Refunds are not processed unless the ITR is verified within the allowed timeline. (Source: NRIHelpline)
After verification, track your refund status on the income tax portal under "Services" then "Refund Status."
The NSDL Refund Tracking service is another option.
Refunds are typically credited within 4 to 5 weeks after processing. (Source: Thane Real Estate News)
Delays occur with AIS mismatches or pending verifications.
What If Refund Processing Is Delayed?
Delays usually have one of four causes.
A mismatch between what you declared in the ITR and what appears in Form 26AS or AIS. The department's systems flag these automatically and pause processing.
Bank account not pre-validated on the income tax portal. Go to "My Profile" on incometax.gov.in, then "Bank Accounts," and validate your NRO account before filing.
ITR not e-verified. An unverified return is treated as invalid.
PAN not linked to the bank account you used.
If the refund is overdue, submit a refund re-issue request on the income tax portal. You can also raise a grievance through the e-Nivaran system.
Interest on Delayed Refunds
Here is something most NRIs do not know.
If the Income Tax Department delays your refund beyond the prescribed period, you earn interest on the outstanding amount.
Example: You file your ITR for FY 2025-26 in July 2026 and claim a Rs 2 lakh refund. The department processes it in December 2026. The interest period runs from 1 April 2026 to the date of processing, at 6% per annum under Section 244A. (Source: Investmates)
This accrues automatically if the delay is on the department's side. It is credited along with your refund.
The Smarter Fix: Apply for Lower TDS Before Deduction
Claiming a refund after the year ends is one approach. But there is a better one.
You can apply for a Lower TDS Certificate under Section 197 of the Income Tax Act. This allows the deductor to deduct TDS at a reduced rate from the start. It avoids the refund wait entirely.
The application is made through Form 13 on the TRACES portal at traces.tdscpc.gov.in. (Source: SBNRI, Rupeeflo)
By applying for Form 13 in advance, you avoid losing liquidity and skip the long wait for refunds. The process is entirely online through TRACES and faceless assessment. Applications can be submitted from anywhere in the world. (Source: SBNRI)
How Form 13 Works
Log in to the TRACES portal and go to "Statements/Forms." Select "Request for Form 13" and choose the financial year. Fill in your residential status, TAN of the deductor, and nature of income. Upload income details and tax liability for the current and last four years.
The Assessing Officer reviews your application. If approved, a Lower TDS Certificate is issued. It specifies the reduced rate, the validity period, and the TAN of the deductor. (Source: Tax2Win)
Share the certificate with your bank or buyer so they deduct at the lower rate going forward.
Important Changes After Budget 2025
After Budget 2025 amendments under Clause 395, NRIs can no longer apply for a Nil TDS certificate. Only lower TDS certificates are issued. The reduced rate is typically around 10%, depending on your estimated income and tax liability. (Source: Rupeeflo)
After recent CBDT amendments, the only method of e-verification for Form 13 submissions on TRACES is a Digital Signature Certificate. Aadhaar OTP and mobile OTP options have been removed. (Source: Tax2Win)
Form 13 certificates are valid for one financial year and need annual renewal. For property transactions, some certificates are issued for specific transactions only. (Source: Investmates)
👉 Before computing your liability, check what deductions and exemptions apply. Our guide on NRI tax exemptions and deductions has the full picture.
Common Mistakes That Block Refunds
Filing the wrong ITR form.
Using ITR-1 when you have capital gains results in a defective return notice. Most NRIs need ITR-2.
Claiming TDS not in Form 26AS.
If the deductor has not filed their return, the TDS entry will not appear. Claiming it before it reflects in Form 26AS creates a mismatch and stalls your refund.
Not pre-validating the bank account.
The refund cannot be credited without a pre-validated account on the income tax portal.
Missing the e-verification deadline.
A filed but unverified return is treated as not filed.
Not claiming DTAA relief.
Many NRIs miss DTAA benefits. Form 10F and the Tax Residency Certificate are not submitted with the ITR. This leaves money on the table.
👉 Our article on common NRI tax filing mistakes covers several of these in more depth.
A Practical Example
Priya lives in London and holds an NRO FD with an Indian bank.
During FY 2025-26, she earned Rs 1.2 lakh in NRO interest. The bank deducted TDS at 30%, which came to Rs 36,000.
Under the new tax regime for AY 2025-26, the basic exemption limit is Rs 4 lakh. Priya's total India income for the year was only the Rs 1.2 lakh in interest. Her actual tax liability was zero.
By filing her ITR, she received the full Rs 36,000 as a refund.
She also applied for a Form 13 certificate for the following year. Her bank now deducts at a lower rate going forward instead of holding her money for months.
What About Resident Indians?
This article focuses on NRIs, but resident Indians face a version of this problem too.
If TDS was deducted above your actual liability, the same ITR filing and refund mechanism applies.
If you are a resident Indian thinking about tax-efficient global investing, GIFT City funds offer a route. They provide global diversification without the full complexity of LRS compliance.
Our article on investing in India vs investing abroad covers how resident Indians can think about this balance.
Filing Deadline for NRIs: AY 2025-26
The ITR filing deadline for non-audit cases for AY 2025-26 was extended to 15 September 2025. (Source: multiple platforms)
For AY 2026-27, the standard deadline is 31 July 2026 subject to any CBDT extension.
For a full breakdown of deadlines, visit our guide on ITR filing deadlines for NRIs.
Beyond Tax Refunds: Structure to Reduce TDS in the First Place
Claiming refunds each year is valid. But paying 30% TDS on NRO interest and waiting months for a refund is inefficient.
Many NRIs we work with gradually shift investable surplus from NRO fixed deposits into GIFT City structures. Returns there are tax-free for NRIs and fully repatriable. No TDS is deducted. No refund process is needed.
At Belong, you can explore:
GIFT City mutual funds offering tax-free returns in USD
DSP Global Equity Fund for global diversification without TDS drag
Tata India Dynamic Equity Fund for India exposure through a tax-efficient structure
Edelweiss Greater China Equity Fund for emerging market access
Sundaram India Mid Cap Fund for mid-cap India growth
Alternative investment funds at GIFT City for higher-conviction positions
NRI FD rates tool to compare current rates before committing
GIFT Nifty tracker to monitor India market signals in real time
Mutual funds for NRIs for a full view of options
Need Help Filing or Claiming Your TDS Refund?
If you have multiple TDS forms, a property sale, multiple income sources, or DTAA claims, the paperwork adds up quickly.
At Belong, we offer a dedicated NRI tax filing service to handle ITR filing and refund claims end to end.
Pricing:
Simple returns: from Rs 2,500
Standard returns: from Rs 4,500
Complex returns with property sales, DTAA, or multiple income sources: from Rs 7,500
For the full range of NRI tax topics we cover, visit our NRI taxation resource centre.
Related Articles in This Series
Frequently Asked Questions
Can NRIs claim a TDS refund without filing an ITR?
No. ITR filing is the only mechanism available. There is no separate refund application process for NRIs. File even if your income is fully taxed at source or below the taxable limit.
How long does the TDS refund take after filing?
Refunds are typically credited within 4 to 5 weeks after processing, provided the return is e-verified and bank account details are correct. (Source: Thane Real Estate News) Delays occur with AIS mismatches or pending verifications.
Which bank account does the refund go to?
The refund is credited to the pre-validated Indian bank account declared in the ITR. For most NRIs, this is an NRO account. Pre-validate it on incometax.gov.in under "My Profile" before filing.
What is Form 13 and when should NRIs apply for it?
Form 13 is an application under Section 197 to obtain a Lower TDS Certificate from the Assessing Officer. It allows the bank, buyer, or tenant to deduct TDS at a reduced rate rather than the standard rate. Apply before the transaction or payment event. (Source: TRACES, Stablemoney)
Can NRIs apply for a Nil TDS certificate after Budget 2025?
No. After Budget 2025 amendments under Clause 395, only lower TDS certificates are issued. Nil certificates are no longer available to NRIs. (Source: Rupeeflo)
What if there is interest earned on a delayed refund?
If the department delays beyond the prescribed period, interest accrues at 6% per annum under Section 244A.
It is computed automatically and credited with your refund.
Disclaimer: This article is for informational purposes only and does not constitute tax or legal advice. Tax regulations change frequently. Please consult a qualified tax professional for advice specific to your situation.
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