TDS Refund for NRI: How to Claim Excess TDS in India

In case of a Non-Resident Indian (NRI), Tax Deducted at Source (TDS) refers to tax deducted on specified types of income such as salary, rent, interest, property transactions, professional payments, and certain other payments as prescribed under the Income Tax Act.

In such cases, the payer (deductor) deducts a certain amount as tax before making the payment and deposits it with the government using their TAN, while quoting the PAN of the payee within the specified time period.

However, if the amount deducted as TDS is more than the actual tax liability, the taxpayer can claim a refund by filing an Income Tax Return (ITR).

In this blog, we will discuss how an NRI taxpayer can claim a refund for the excess TDS deducted. We will also understand which ITR form needs to be filed and how the process works. Before that, let’s understand what a TDS refund is.

What is a TDS Refund?

A TDS refund arises when the taxes deducted at source are more than the actual tax payable calculated for the financial year.

In simple terms, when you file an ITR and the final tax liability is less than the tax already deducted, the extra TDS can be claimed as a refund.

While filing the ITR, the taxpayer must include all income earned during the financial year from various sources. After calculating the total tax liability, the TDS already deducted is adjusted against it.

If the TDS deducted exceeds the final tax liability, the taxpayer becomes eligible to receive a refund from the government.

Example:
If an NRI earns interest income in India and the bank deducts ₹50,000 as TDS but the final tax liability after deductions is only ₹30,000, the excess ₹20,000 can be claimed as a refund while filing the Income Tax Return.

Why Excess TDS Happens for NRIs

NRIs often face higher TDS deductions because taxes are deducted at fixed rates without considering the final tax liability.

Common reasons why NRIs face excess TDS deductions include:

• Banks deducting TDS at 30% on NRO interest
• Buyers deducting higher TDS on property transactions
• TDS deducted without considering DTAA benefits
• Incorrect PAN details
• Not applying for lower TDS certificate (Form 13)

Due to these reasons, the actual tax liability may become lower than the tax deducted, which results in a refund while filing the Income Tax Return.

Common Situations Where NRIs Get TDS Refund

NRIs commonly experience excess TDS deductions in certain types of income.

Excess TDS on Income Like Rent, Interest, or Capital Gains

For NRIs, TDS is often deducted at higher flat rates even if the final taxable income becomes lower after deductions, exemptions, or DTAA relief.

If the final tax liability is less than the TDS deducted, the refund can be claimed by filing the ITR.

TDS on Interest Income (NRO Accounts)

Indian banks generally deduct TDS at higher applicable rates on interest earned in NRO accounts.

TDS on NRO interest is usually deducted at 30% plus applicable surcharge and cess under the Income Tax Act.

If DTAA benefits apply but were not considered by the bank, the excess tax can be claimed as a refund while filing the ITR.

For future lower TDS deduction, documents like:

• Tax Residency Certificate (TRC)
• Form 10F
• Self-declaration

may be submitted to the bank.

TDS on Sale of Property in India

When an NRI sells property in India, the buyer must deduct TDS at applicable rates depending on whether the gain is long-term or short-term.

Typically, this may be around 20% for long-term capital gains plus surcharge and cess, or applicable slab rates for short-term gains.

If the final tax liability becomes lower due to indexation, exemptions, or deductions, you can:

• Claim a refund by filing ITR, or
• Apply for a lower TDS certificate in advance.

Example

If an NRI sells property for ₹80 lakh and the buyer deducts TDS of ₹16 lakh, but the actual tax liability after indexation becomes ₹9 lakh, the NRI can claim a refund of ₹7 lakh while filing the Income Tax Return.

Important Tax Provisions for NRI TDS

Certain provisions of the Income Tax Act specifically apply to tax deductions on payments made to NRIs.

Section 195 – TDS on Payments to NRIs

Under Section 195 of the Income Tax Act, any payment made to a Non-Resident that is taxable in India is subject to TDS.

This includes payments such as:

• Rent
• Professional income
• Property sale consideration
• Interest income
• Royalty payments

The payer must deduct tax before making the payment to the NRI.

Lower TDS Certificate (Form 13)

If the expected tax liability is lower than the standard TDS rate, the NRI can apply for a lower deduction certificate under Section 197 of the Income Tax Act using Form 13.

Once approved, the payer deducts tax at the lower rate specified by the Income Tax Department.

This helps NRIs avoid large refunds later and improves cash flow.

How to Claim TDS Refund Online?

NRIs can claim a refund if excess TDS has been deducted on income earned in India. Filing the ITR within the prescribed time is necessary for claiming the refund.

Providing accurate bank details is important. Ideally, an NRO account should be mentioned because refunds are usually credited to Indian bank accounts.

Required details include:

• Bank name
• Account number
• IFSC code

NRIs generally file ITR-2 if they have income from salary, rent, capital gains, or interest.

Which ITR Form Should NRIs Use?

The ITR form depends on the type of income earned by the NRI.

Most NRIs who earn income from rent, capital gains, or bank interest file ITR-2.

How to Claim TDS Refund Online

You can claim a TDS refund online by following these steps:

1. Register on the Income Tax Department’s e-filing portal.
2. Select the relevant assessment year.
3. Choose the correct ITR form.
4. Fill in income and TDS details accurately.
5. Provide correct bank account details.
6. Submit the return.
7. Complete e-verification using Aadhaar OTP, net banking, digital signature, or other available methods.

If electronic verification is not completed, the signed ITR-V may need to be sent to CPC within the prescribed time.

Documents Required to Claim TDS Refund

NRIs should keep the following documents ready while filing the return:

• PAN card
• Form 26AS
• AIS / TIS statements
• Bank account details
• TDS certificates (Form 16A)
• Property transaction documents (if applicable)

How to Check TDS Refund Status

You can verify your refund status online through the Income Tax e‑Filing Portal India.

Step 1: Log in to your e-filing account and go to
e-File → Income Tax Returns → View Filed Returns.

Step 2: Select the relevant assessment year and click “View Details.”

Step 3: If the return is processed with a refund, click the refund status link.

Step 4: The screen will display filing date, verification status, processing details, and refund issue information.

What Is the TDS Refund Period?

There is no fixed statutory timeline for issuing refunds.

Generally, refunds are processed after ITR verification and processing, often within about 1–3 months.

However, timelines can vary depending on return accuracy, verification completion, and departmental processing.

Applicable Interest on TDS Refund

If the Income Tax Department delays the refund, interest may be payable under Section 244A of the Income Tax Act.

The interest rate is approximately 0.5% per month (6% per annum).

If the return is filed within the due date, interest is usually calculated from 1 April of the relevant assessment year until the refund is issued.

Otherwise, it may be calculated from the filing date.

Types of Income Tax Refund Status

When you verify your TDS refund status, it might show a different status depending on your application, and every status will have a different meaning. Understanding the status types and their meaning is vital to take the necessary steps accordingly. The following are the types of refund status, their meaning, and the actions that need to be taken:

• Refund Paid: Your return has been processed and the refund credited. Check your bank account.
• No Demand, No Refund: No tax payable and no refund due. Compare calculations with the intimation received and file rectification if needed.
• Refund Unpaid: Refund approved but not credited due to incorrect bank details. Update the details and request refund reissue.
• Not Determined: The return has not yet been processed. Check the status again later.
• Refund Determined and Sent to Banker: Refund approved and forwarded for payment. Wait for the credit to your bank account.
• Demand Determined: Additional tax payable due to mismatch with department calculations. Review the Section 143(1) intimation and respond accordingly.

To Conclude

Taxes are an important part of financial compliance, and understanding the NRI TDS refund process helps NRIs manage their tax obligations in India effectively.

This guide explains TDS deductions, ITR filing, and refund claims in a simple way to help you navigate the process.

If you still face challenges with tax obligations or refund claims, SaveTaxs can assist you. With experienced tax professionals, support can be provided at every stage, from filing an ITR to checking refund status, making tax compliance easier and more manageable.