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Wade Said:

Since int. on NRO a/c is subject to TDS, is there a provision (like15G, 15H) per Indian IT law to avoid it?

We Answered:

The below question is similar your question and the answer is given by a C.A. Read it. But it is 1 year old question when the TDS limit was 5000 (Now 10,000) and tax free amount was 1 lakh (Now 1,10,000). The answer is still valied in other aspects. You can file your returns and can claim for refund. As an NRI, you are not eligable for 15G/H. The site address given at the end of the answer.

Q : I am an NRI and my total Indian income is less than Rs. 1 lakh. Yet I am being made to bear withholding tax of as much as 30.6% on my NRO interest. Moreover, such interest is not even Rs. 8,000. Can I submit Form 15G / 15H to avoid being subjected to this tax. Also, if such tax is deducted, do we get any certificate certifying that such tax is indeed deducted?

--- Ram Varma

A : As per the Income Tax Act, under sec. 195, TDS has to be deducted on all payments (except interest on NRE and FCNR accounts) made to NRIs including interest on NRO account. This is notwithstanding the final tax liability of the NRI. Therefore, in your case, though your total Indian income including interest from NRO is less than Rs. One Lakh, since you have the status of NRI, the Bank is obliged to deduct tax at source. There is no maximum threshold below which such tax is not to be deducted. Also, the facility of submitting Form 15H is not available to NRIs. This is as per the law.The deductor Bank would provide you with the required TDS certificate. TDS is deducted on the accrued interest per annum.

To reiterate, the TDS is not the same as your tax liability. This liability will be computed on the basis of your income and the exemptions, deductions and rebates you can claim. If your final tax liability is less than the TDS, the only practical way is to file the tax returns and ask for refund.

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