Only NRO Interest Income with TDS Deducted: Is ITR Filing Still Required?

My Only Indian Income Is NRO Interest and TDS Is Already Cut – Do I Still Have to File?

Summary: The content explains that an NRI must file an Indian income tax return for FY 2025-26 if total Indian income exceeds the basic exemption limit of Rs. 4,00,000 under Section 115BAC, or if the taxpayer wishes to claim a refund of excess TDS or carry forward a capital loss. It states that the Section 87A rebate available to residents does not apply to NRIs, making the Rs. 4 lakh exemption threshold relevant for them. The content notes that NRO interest is subject to TDS at about 31.2%, while the actual tax liability computed under the slab rates may be lower, allowing the excess TDS to be claimed as a refund only by filing a return. It further states that filing is also required where an NRI has capital gains from Indian property or shares or wishes to carry forward a capital loss, whereas filing is not mandatory if the only income is exempt NRE/FCNR interest. The content also suggests using applicable DTAA benefits by furnishing a Tax Residency Certificate and Form 10F to reduce TDS at source, states that FY 2025-26 returns are governed by the Income-tax Act, 1961, generally due by 31 July 2026, and advises retaining Form 16A and interest statements for reconciliation.

I live in Singapore. My only Indian income is interest on an NRO deposit – about INR 6 lakh a year – and my bank already deducts hefty TDS on it. A friend says that means I’m ‘done’ and don’t need to file anything in India. Is that right, or am I about to make a mistake?

Your friend is half right and half about to cost you money. Yes, TDS being deducted means the tax department has been paid something. But ‘TDS was cut’ and ‘you’ve settled up correctly’ are two very different things. In the vast majority of NRO cases, not filing means quietly gifting the government a large refund you were entitled to. Let’s settle when an NRI genuinely must file – and why filing usually pays you.

The short answer

As an NRI you must file an Indian income tax return for FY 2025-26 if either of these is true:

• Your total Indian income exceeds the basic exemption limit – INR 4,00,000 under the new regime (Section 115BAC); or
• You want to claim a refund of excess TDS, or carry forward a capital loss.

A crucial catch that trips up NRIs: the Section 87A rebate that makes income up to INR 12 lakh tax-free is available only to residents. As an NRI you don’t get it – so your tax is computed from the very first rupee above INR 4 lakh. That makes the INR 4 lakh exemption threshold, not INR 12 lakh, your line in the sand.

Why filing almost always gets you money back

NRO interest suffers TDS at a flat ~31.2%, regardless of your actual slab. But your actual tax, computed across the slabs, is usually far lower. The gap is your refund – and the only way to claim it is to file.

Back to our Singapore reader with INR 6,00,000 of NRO interest and no other Indian income:

That’s INR 1,76,800 the reader would simply lose by taking the ‘TDS was cut, I’m done’ advice. One return brings it home.

When an NRI must file ITR for FY 2025-26 – at a glance

Reduce the TDS in the first place

If you’d rather not lend the government money interest-free all year, use your treaty. Singapore, the UAE, the UK and most countries have a DTAA with India that caps interest TDS (often at 10-15%). Give your bank a Tax Residency Certificate and Form 10F, and the deduction drops at source – smaller refund to chase later, more cash in hand now.

Practical filing notes

• Due date: for FY 2025-26, the return is generally due by 31 July 2026 (a simple interest-income case needs no audit).
• NRIs typically file ITR-2 (interest, capital gains, property) rather than ITR-1.
• A note on the law in force: the return for FY 2025-26 is governed by the Income-tax Act, 1961; the new Income-tax Act, 2025 takes effect only from FY 2026-27, so it does not apply to this year’s filing.
• Keep your Form 16A (TDS certificate) and interest statements to reconcile against your tax-credit statement before filing.

The takeaway

‘TDS was deducted’ does not mean ‘correctly taxed’. If your Indian income crosses INR 4 lakh you must file; and even if it doesn’t, filing is how you reclaim the excess 31% the bank withheld. For most NRIs sitting on NRO interest, a single annual return is the difference between recovering lakhs and silently donating them. File it – and use your tax treaty so the over-deduction doesn’t happen next year in the first place.

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About the Author: Sonia Dawar is a Chartered Accountant and the founder of Dawar & Co. She has spent years helping NRIs, returning Indians and cross-border families untangle India’s tax rules without the jargon – turning intimidating questions into clear, confident decisions. Have a burning NRI tax question? Write to her at sonia@dawarandco.com or visit dawarandco.com.

Disclaimer: This article is for general information based on the Income-tax Act, 1961 (governing FY 2025-26) and is not a substitute for personalised professional advice.