NRI Tax Refunds in India: How to Claim, Track, and Avoid Delays

A gentleman we know in Toronto had TDS of Rs. 1.4 lakh deducted on his NRO fixed deposit interest over two years.

His actual tax liability was Rs. 22,000.

He did not file an ITR for either year because he assumed his income was too low to matter. He left Rs. 1.18 lakh on the table. That money was sitting in the government's account, not his.

Filing the returns took three hours across two evenings. The refunds came within six weeks.

This is one of the most common and most avoidable situations we see among NRIs with Indian income. TDS is deducted at flat rates that often exceed actual liability. The only way to recover the excess is to file an ITR and claim it.

This guide covers exactly how to do that, how long it takes, how to track it, and how to fix it if something goes wrong.

Why NRIs Are Often Owed a Tax Refund

TDS on NRI income is deducted at flat statutory rates. These rates do not account for your actual income level, applicable deductions, or DTAA benefits.

The most common situations where NRIs overpay:

NRO fixed deposit interest.

Banks deduct TDS at 30% plus surcharge and cess on NRO interest, regardless of how much interest you actually earned. If your total Indian income is below the taxable threshold, or if your effective rate under DTAA is lower, you have paid more tax than required.

Rental income.

Tenants deduct TDS at 31.2% on rent paid to NRI landlords. After claiming the 30% standard deduction on property income and any home loan interest, your actual liability may be significantly lower. (Source: Income Tax Act, Section 24)

Property sales.

Buyers deduct TDS at 20% on long-term capital gains from property sold by NRIs, on the full sale value in many cases. After indexation and applicable exemptions under Section 54, your actual liability may be a fraction of the TDS deducted. (Source: Income Tax Act, Section 195)

Capital gains from mutual funds and equities.

AMCs and brokers deduct TDS on redemptions by NRIs. If the actual gain after exemptions is lower, you are owed a refund.

Income below the exemption limit.

For AY 2025-26 under the new tax regime, the basic exemption limit for individuals below 60 is Rs. 4 lakh. If your total Indian income is below this and TDS was still deducted, the entire TDS amount is refundable. (Source: Income Tax Act, Finance Act 2025)

The refund does not come automatically. You must file an ITR and claim it.

👉 Tip: NRIs who earn only NRO interest and believe their income is "too small to file" are often leaving thousands of rupees unclaimed. If TDS was deducted on any Indian income, filing is almost always worth it.

Which ITR Form Should NRIs Use?

Choosing the wrong form is one of the most common errors at this stage.

NRIs cannot use ITR-1. That form is exclusively for resident Indians with simple income. (Source: Income Tax Department)

Most NRIs with standard India-sourced income — NRO interest, rental income, capital gains from property or mutual funds — will use ITR-2.

If you are unsure which form applies to your income profile, see our guide on how NRIs can file income tax returns in India.

Documents You Need Before Filing

Gather these before you open the portal.

• NRO bank interest certificate from each bank for the financial year

• NRE bank interest certificate (to declare as exempt income under Section 10(4))

• Form 26AS downloaded from incometax.gov.in showing TDS credits

• AIS (Annual Information Statement) from the portal

• Capital gains statement from your broker or AMC if you redeemed investments

• Form 16A from your bank confirming TDS deducted on NRO interest

• Form 16B from the buyer if you sold property

• Rental income details and home loan interest certificate if applicable

• Passport copy confirming NRI status PAN card

For a full reconciliation of your AIS before filing, read our guide on how NRIs can check AIS before filing ITR.

How to Claim Your NRI Tax Refund: Step by Step

Step 1: Confirm Your Residential Status

Your status for the year determines which income is taxable and which exemptions apply. If you are an NRI, only India-sourced income is taxable. If you are RNOR, the rules are slightly different.

Use our NRI Residential Status Calculator to confirm before you file.

Step 2: Calculate Your Actual Tax Liability

Add up all India-sourced income: NRO interest, rental income, capital gains, dividends.

Apply the deductions you are entitled to: 30% standard deduction on rental income, home loan interest under Section 24, and any applicable DTAA benefits on NRO income.

Your actual tax liability is likely lower than the TDS already deducted. The difference is your refund.

For a full picture of what income is taxable and what is exempt, read our guide on NRI income that is taxable in India.

Step 3: Check and Reconcile Form 26AS and AIS

Before filing, confirm that all TDS entries in Form 26AS match your actual certificates. Every rupee of TDS you want to claim as credit must appear in Form 26AS. If it does not, contact your bank or payer immediately.

Reconcile against your AIS for any income entries you may have missed. A mismatch between your ITR and AIS is one of the primary reasons refunds are held up. For a detailed guide on handling AIS errors, read our article on AIS mismatch for NRIs.

Step 4: Pre-Validate Your Bank Account

This step stops more NRI refunds than almost anything else.

Log in to incometax.gov.in. Go to your profile. Navigate to My Bank Account. Add your NRO or NRE account and pre-validate it.

Pre-validation confirms that the account is active, PAN-linked, and ready to receive a credit. If your account is not pre-validated, the refund will fail even after your return is processed. (Source: Income Tax Department)

NRIs can pre-validate an NRO or NRE account. The account details including name, PAN, IFSC, and account number must match exactly.

Step 5: File Your ITR Online

Go to incometax.gov.in. Log in with your PAN. Select e-File, then Income Tax Returns, then File Income Tax Return.

Select AY 2025-26 for FY 2024-25 income. Choose ITR-2 for most NRIs. Fill in your income, exemptions, deductions, and TDS credit details.

Declare NRE interest as exempt under Section 10(4). Declare any DTAA benefits you are claiming. Verify that TDS credits match your Form 26AS entries exactly.

For a step-by-step walkthrough of the online filing process, see our guide on how to file ITR online as an NRI.

Step 6: E-Verify Within 30 Days

Filing is not complete until you e-verify. An unverified ITR is treated as not filed and will not be processed. (Source: Income Tax Department)

E-verification options for NRIs:

Net banking through your Indian bank account Aadhaar OTP if your mobile number is linked to Aadhaar (note: many NRIs have non-Indian mobile numbers linked to the portal — check in advance) Digital Signature Certificate (DSC) — most reliable for NRIs without active Indian mobile numbers Sending the signed ITR-V physical form to CPC Bengaluru (this takes longer and is the fallback option)

👉 Tip: Test your e-verification method before filing season. If your Aadhaar OTP fails due to an overseas number, arrange a DSC in advance rather than scrambling after submission.

Step 7: Track and Receive

After e-verification, processing typically begins within a few days. Refunds are credited to your pre-validated bank account within 4 to 5 weeks in most cases. (Source: India Filings, April 2026)

For straightforward returns filed early in the season, processing can be faster. Complex returns using ITR-2 or ITR-3 take longer than simple forms. (Source: ClearTax, 2025)

How to Track Your Refund Status

There are two ways to check.

Method 1: Income Tax e-Filing Portal

Log in at incometax.gov.in. Go to e-File, then Income Tax Returns, then View Filed Returns. The status will show one of the following:

Return submitted and pending verification Successfully e-verified ITR processed, refund determined Refund credited Refund failed

Method 2: TIN-NSDL Portal

Go to tin.tin.nsdl.com/oltas/refundstatuslogin.html. Enter your PAN and the relevant assessment year. This shows the current status of the refund payment itself, separate from return processing.

Both methods are useful. The e-filing portal shows return processing status. The NSDL portal shows payment status.

Why NRI Refunds Get Delayed: The Real Reasons

For AY 2025-26, over 24 lakh returns were pending for more than 90 days as of February 2026, according to Bajaj Finserv. Enhanced AI-driven risk management and data-matching checks are the primary cause. (Source: Bajaj Finserv, 2026)

For NRIs specifically, these are the most common delay triggers.

Bank account not pre-validated.

The single most frequent cause. If the account number, IFSC, or name does not match your PAN records exactly, the refund fails at the payment stage. (Source: ClearTax, 2025)

AIS and ITR mismatch.

If your declared income does not match what AIS shows, the return is flagged for manual review. This can delay processing by weeks or months.

Outstanding demand from a prior year.

The department adjusts current year refunds against any unpaid demand from earlier assessments. Check your demand status under the Pending Actions section of the portal before filing.

Return filed close to the deadline.

Returns filed in the last two weeks of July are processed in batches with lower priority. Earlier filing means earlier processing. (Source: India Filings, April 2026)

Return selected for scrutiny.

High-value refund claims, large property transactions, or patterns that diverge from prior years can trigger scrutiny under Section 143(2). This extends the timeline significantly.

E-verification done late.

The clock on processing does not start until e-verification is complete. Returns where ITR-V was sent by post rather than e-verified can wait weeks before the verification is acknowledged.

Incorrect DTAA claim.

If you claimed a DTAA benefit without the required Tax Residency Certificate (TRC) or without filling Schedule DTAA in the ITR, the claim may be rejected and the return flagged. (Source: Income Tax Act, Section 90)

For more on DTAA and how NRIs can use it correctly, read our guide on how to avoid double taxation as an NRI.

👉 Tip: File in April or May rather than July. Early filers get processed first, receive refunds faster, and have more time to fix issues if something is flagged.

How to Fix a Delayed or Failed Refund

If the status shows "Refund Failed"

This usually means a bank account issue. Log in to incometax.gov.in. Go to Services, then Refund Reissue. Select the assessment year. Choose a pre-validated bank account - update the details if needed and submit. (Source: India Filings, April 2026)

If the refund has been adjusted against a prior demand

Check the portal under e-File, then Pending Actions, then Response to Outstanding Demand. If the demand is incorrect, file a rectification request under Section 154. If it is valid, pay it and then the remaining refund will process.

If the return is under processing beyond 60 days

Raise a grievance on the portal. Go to e-Nivaran or the Grievance section. Describe the issue, attach your e-verification acknowledgment, and submit. You can also call the CPC Bengaluru helpline at 1800-103-4455. (Source: IndiaFilings, Bajaj Finserv)

If you claimed a refund but forgot to include certain income

Do not wait. File a revised return under Section 139(5) before December 31 of the assessment year. Declare the missed income, recalculate tax, and resubmit. A corrected return filed voluntarily is treated more favourably than one corrected after a notice.

For more on how mismatch notices work and how to respond, see our guide on common NRI ITR filing mistakes.

Interest on Delayed Refunds

If the Income Tax Department delays your refund beyond a reasonable period, you are entitled to interest under Section 244A of the Income Tax Act.

Interest accrues at 0.5% per month, or part of a month, on the refund amount. It starts from April 1 of the assessment year if the return is filed on time, or from the date of filing if filed late. (Source: Income Tax Act, Section 244A)

This interest is taxable in the year it is received. Declare it as income from other sources in the year your refund arrives.

If your refund carries significant interest and the department has not credited it, raise a grievance. The department is obligated to pay it.

DTAA and Lower TDS: Reducing the Gap Before It Happens

The cleanest approach to the refund problem is reducing excess TDS before it is deducted, not chasing it back afterward.

If your country of residence has a DTAA with India, the withholding tax on NRO interest may be lower than 30%.

For the India-UAE DTAA, NRO interest is taxable at a maximum of 12.5% in many cases. For India-USA, the rate is 15%. For India-UK, it is 15%. (Source: respective DTAA treaties, income tax portal)

To claim the lower rate, you need a Tax Residency Certificate (TRC) from the tax authority of your country of residence. Submit it to your Indian bank with Form 10F before the financial year begins. The bank will then deduct TDS at the DTAA rate instead of 30%.

This does not eliminate the need to file an ITR, but it dramatically reduces the amount you are chasing as a refund each year.

For a full breakdown of how DTAA benefits work for NRIs, read our guide on the India-UAE DTAA and tax benefits for NRIs filing in India.

👉 Tip: If your NRO interest is significant and you live in a DTAA country, submitting your TRC to your bank before the year starts can save more than filing a refund afterward. The TRC process typically takes two to three weeks in the UAE and UK.

A Pre-Filing Refund Checklist for NRIs

Run through this before you open the ITR form.

• Confirm residential status for the year using the NRI Residential Status Calculator

• Download Form 26AS and AIS from incometax.gov.in

• Collect NRO and NRE interest certificates from all banks

• Collect capital gains statements from all brokers and AMCs

• Confirm that all TDS entries in Form 26AS match your certificates

• Pre-validate your NRO or NRE bank account on the portal

• Check for any outstanding demand on the portal under Pending Actions

• Choose ITR-2 (or ITR-3 if business income applies)

• Declare NRE interest as exempt under Section 10(4)

• Declare DTAA benefits with TRC and Form 10F if applicable

• E-verify immediately after filing Track status from the portal and NSDL after e-verification

What to Invest Your Refund In

Once your refund arrives in your NRO or NRE account, it is worth thinking about where it goes next.

NRE FD interest is tax-free in India and fully repatriable. Compare current rates across banks using our NRI FD Comparison Tool before parking the money.

If you want to invest rather than simply deposit, GIFT City mutual funds offer USD-denominated investing with no capital gains tax in India. Explore options on the GIFT City Mutual Funds tool.

Fund-specific options: DSP Global Equity Fund, Tata India Dynamic Equity Fund, Edelweiss Greater China Equity Fund, and Sundaram India Mid Cap Fund.

For alternative investments beyond mutual funds, explore the GIFT City AIF Explorer.

Track the GIFT Nifty live and monitor currency movements using the Rupee vs Dollar Tracker.

Explore GIFT City IPO opportunities, our IPO products page, and the full Belong mutual funds platform.

Need Help Filing Your NRI Return and Claiming Your Refund?

At Belong, our NRI tax filing service handles the full cycle: AIS review, return preparation, DTAA application, refund tracking, and notice responses.

Pricing by complexity:

Simple returns: Rs. 2,500 Standard returns (NRO income, capital gains, NRE exemptions): Rs. 4,500 to Rs. 5,500 Complex returns (property transactions, DTAA claims, multiple income sources): Rs. 7,500 to Rs. 8,500

Use the NRI Compliance Compass for a structured view of your obligations.

Frequently Asked Questions

Q: Can NRIs claim a refund even if their Indian income is below the taxable limit?

Yes. If TDS was deducted on any India-sourced income and your total Indian income is below the exemption limit, the entire TDS amount is refundable. You must file an ITR to claim it. The refund does not come automatically. (Source: Income Tax Act)

Q: Which bank account should the refund be credited to - NRO or NRE?

The refund must be credited to a pre-validated Indian bank account. Both NRO and NRE accounts can be pre-validated and nominated for refund. NRE account refunds are fully repatriable. NRO account funds are repatriable subject to annual limits of USD 1 million per financial year. (Source: RBI FEMA guidelines)

Q: My refund status says "under processing" for more than 60 days. What do I do?

Raise a grievance through the e-Nivaran section of incometax.gov.in. Attach your filing acknowledgment and e-verification confirmation. If unresolved, call the CPC helpline at 1800-103-4455.

Q: I forgot to claim DTAA benefit while filing. Can I correct it?

Yes. File a revised return under Section 139(5) before December 31 of the assessment year. Include Schedule DTAA, your TRC, and Form 10F. The revised return replaces the original and the corrected refund will be processed.

Q: My refund was adjusted against a demand I do not recognise. What should I do?

Log in to the portal, go to Pending Actions, and check the demand notice. If the demand is incorrect, file a rectification request under Section 154 with supporting documents. If the demand was raised in error, it will be reversed and the adjusted refund will be released.

Q: Is the interest received on a delayed tax refund taxable?

Yes. Interest paid under Section 244A on a delayed refund is taxable as income from other sources in the year it is received. Declare it in the ITR for that year. (Source: Income Tax Act, Section 244A)

Q: What is the last date to file ITR and claim a refund for FY 2024-25?

The standard deadline is July 31, 2025 for AY 2025-26. A belated return can be filed under Section 139(4) up to December 31, 2025, with a late fee. An updated return under Section 139(8A) can be filed up to two years from the end of the assessment year. For the full deadline details, see our guide on the NRI ITR filing deadline.

Disclaimer: This article is for informational purposes only and does not constitute tax or legal advice. Tax laws and portal procedures can change. Please consult a qualified tax advisor for decisions specific to your situation.