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Using a DTAA to cut Indian tax as an NRI: TRC, Form 41 (old Form 10F) and treaty rates

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In short

  • Banks deduct 30% plus surcharge and 4% cess on NRO interest, but the US, UK, Canada, Australia and Singapore treaties cap Indian tax on an individual's interest at 15%, and the UAE treaty at 12.5%.
  • To claim the treaty rate you need a Tax Residency Certificate from your country and Form 41, which replaced Form 10F under Rule 75 of the Income-tax Rules, 2026.
  • Form 41 is filed online on the e-filing portal, once per tax year, and can be filed without a PAN.
  • Indian tax paid at the treaty rate can usually be claimed as a foreign tax credit in the US, UK, Canada and Australia.

A double taxation avoidance agreement (DTAA) lets you pay Indian tax at the treaty rate instead of the higher domestic rate. On NRO interest, that usually means 15% or 12.5% instead of 30% plus surcharge and cess. To get it, give your bank a Tax Residency Certificate (TRC) from your country and Form 41. Form 41 is the online declaration that replaced Form 10F on 1 April 2026.

The tax you still pay in India can normally be credited against tax on the same income in your country of residence. Done properly, you pay once, not twice.

Why the treaty rate beats domestic TDS

Under the Income-tax Act, 2025, tax on payments to non-residents is deducted under Section 393(2) (Section 195 of the 1961 Act). For an NRI, the usual domestic rates are:

  • NRO interest: 30%, under the residual “other income” entry;
  • Dividends from Indian companies: 20%.

Surcharge applies at higher income levels, and 4% health and education cess applies on top. So the default on NRO interest is at least 31.2%.

Treaties override the Act where they are more favourable. Section 159 of the 2025 Act (Sections 90 and 90A of the 1961 Act) gives effect to India’s treaties. The Income-tax Department’s own rate tables apply whichever rate is more beneficial to the non-resident.

A treaty rate is a ceiling on Indian tax. It is not an extra tax. The Hyderabad tribunal, for example, has held that surcharge and cess cannot be added on top of a treaty rate. Its reasoning was that the treaty caps the whole tax.

Treaty rates on interest and dividends

The rates below come from the Income-tax Department’s withholding tax table and the treaty texts. For an individual NRI, the “other cases” rate is usually the one that applies, because the lower rates are for banks or company shareholders.

Country Interest (individual) Interest (bank lender) Dividends (individual) Dividends (company with large stake)
USA 15% 10% 25% 15% (10% or more of voting stock)
UK 15% 10% 10% 10% (15% for certain property investment vehicles)
Canada 15% 15% 25% 15% (10% or more of voting power)
UAE 12.5% 5% 10% 10%
Australia 15% 15% 15% 15%
Singapore 15% 10% 15% 10% (25% or more of shares)

Two points stand out. First, for US and Canadian residents the treaty dividend rate for individuals is 25%, which is higher than India’s 20% domestic rate. You simply stay on the domestic rate. Second, UK and UAE residents get a 10% cap on Indian dividends, half the domestic rate.

Step 1: get a Tax Residency Certificate

The TRC proves you are a tax resident of the other country. Your home tax authority issues it, not India. The TRC must cover the relevant Indian tax year.

  • USA: apply to the IRS on Form 8802. The IRS issues Form 6166. The individual fee rose from USD 85 to USD 105 for applications postmarked on or after 1 October 2026.
  • UK: HMRC has an online certificate of residence service. You state the treaty, the income type and the treaty article you are claiming under.
  • UAE: apply through the Federal Tax Authority’s EmaraTax portal. Individuals without a tax registration number pay a 50 dirham submission fee plus a 1,000 dirham review fee.
  • Canada, Australia, Singapore: apply to the national tax authority. Check its website for the current form and fee.

Step 2: file Form 41 (formerly Form 10F)

Form 41 is titled “Information to be provided under section 159(8) of the Act”. It sits under Rule 75 of the Income-tax Rules, 2026, which replaced Rule 21AB. Section 159(8) corresponds to Sections 90(5) and 90A(5) of the 1961 Act.

Section 159(8) makes the TRC alone insufficient. You also need the prescribed information, which is what Form 41 supplies. The department’s FAQs call Form 41 mandatory for claiming treaty benefits.

Key facts about Form 41:

  • It is filed online only, on the e-filing portal. There is no paper version.
  • You can file without a PAN by registering as a non-resident without PAN.
  • It asks for your name, address, status, nationality, overseas address and foreign Tax Identification Number. You upload the TRC with it.
  • You verify it with EVC, a digital signature or, for non-PAN users, an OTP.
  • File it once per tax year in which you claim treaty benefits. It cannot be edited after submission.

Step 3: give the documents to the payer

Send the TRC and the Form 41 acknowledgement to each payer: your bank for NRO interest, and the company or its registrar for dividends. Most banks also ask for a PAN copy and their own self-declaration.

Send them early in the tax year. Banks apply the treaty rate only from the date they receive valid documents, and many have an internal cut-off before each quarterly interest posting. If excess TDS has already been deducted, you can claim the difference as a refund in your Indian return. See do NRIs need to file an ITR in India.

The same TRC and Form 41 are needed when a CA certifies a treaty rate in Form 146. See Forms 145 and 146.

Step 4: claim a foreign tax credit at home

Most countries tax residents on worldwide income, including Indian NRO interest and dividends. They then give credit for Indian tax, limited to what the treaty allows.

  • USA: claim the credit on Form 1116. The IRS allows credit only for the reduced treaty amount, not any excess India withheld.
  • UK: claim Foreign Tax Credit Relief in your Self Assessment return. Relief is limited to the treaty rate.
  • Canada: claim the federal credit on Form T2209. Tax paid above the treaty rate does not qualify.
  • Australia: claim the foreign income tax offset in your return, after the Indian tax is paid.
  • UAE: there is no personal income tax, so nothing to credit. Every rupee of Indian tax saved is a direct gain.
  • Singapore: foreign-sourced income received by resident individuals is generally exempt, so the Indian tax is usually the final cost.

This is why the treaty rate matters most for UAE and Singapore residents. A US or UK resident often recovers Indian tax through the credit. Excess TDS above the treaty rate, though, can only come back as an Indian refund.

Worked example: NRO interest for a US resident

Arjun lives in California. His NRO fixed deposit pays Rs 2,00,000 of interest in tax year 2026-27. His total Indian income is small, so surcharge does not apply.

Without treaty documents

Rs 2,00,000 x 30% = Rs 60,000. Cess at 4%: Rs 60,000 x 4% = Rs 2,400. Total TDS: Rs 62,400. Effective rate 31.2%.

With TRC and Form 41

Rs 2,00,000 x 15% = Rs 30,000. Saving in India: Rs 62,400 - Rs 30,000 = Rs 32,400.

At home in the US

Arjun reports the interest on his US return. He can claim a foreign tax credit for the Rs 30,000 of treaty-rate tax, subject to US limits. Without the treaty documents, he would need an Indian refund claim for the excess Rs 32,400. The IRS will not credit tax above the treaty rate.

For a Dubai resident with the same interest, the treaty rate is 12.5%: Rs 2,00,000 x 12.5% = Rs 25,000. The saving against Rs 62,400 is Rs 37,400, and there is no home tax to offset.

Common mistakes

  • Sending only the TRC. Under Section 159(8) you also need Form 41, filed online.
  • Using last year’s TRC. The certificate must cover the Indian tax year you are claiming for.
  • Expecting treaty rates on NRE interest. NRE interest is already exempt in India; the treaty is irrelevant there.
  • Claiming the 10% bank rate as an individual. The lower interest rates in most treaties are for banks and financial institutions.
  • Assuming the dividend rate is always lower. For US and Canadian individuals, India’s 20% domestic rate is better than the treaty’s 25%.
  • Not checking your residence for treaty purposes. If you are resident in both countries, the treaty’s tie-breaker rules decide. A chartered accountant can help if your situation is unclear.

What to do next

Sources

This guide explains the rules as they stood on 25 October 2026. It is general information, not tax, legal or financial advice. Rules change, and individual cases have exceptions, so confirm your position with a chartered accountant before acting. Spotted an error? Tell us and we will correct it.