Short answer
A tax treaty, or DTAA (Double Taxation Avoidance Agreement), is an agreement between India and another country to avoid your income being taxed twice, once in India and once where you live. On India’s side, the treaty caps the tax India may take on your NRO interest and Indian dividends, and you pay whichever is lower: the cap or India’s own rate.
To claim it, you get a tax residency certificate from your home government. You then file Form No. 41 yourself, online, for each tax year you claim: it is a self-declaration that holds the details India asks for with your certificate (explained below).
On your home side, either your country gives you credit for the tax India took, or, like the UAE, it has no personal income tax to charge.
If you live in the UAE, the cap on interest is 12.5%, against India’s base rate of 30%. Surcharge and cess, two extra charges, are added on top of the 30%, so the total deducted can be more than 30%. The UAE certificate comes from the Federal Tax Authority. If more tax is taken than you owe, you get the excess back by filing an Indian return.
This guide is for you if you live abroad and earn interest on an NRO account or dividends from Indian shares. It covers India’s treaties with the UAE, Singapore, the US and the UK. Saudi Arabia, Kuwait and Oman also have a treaty with India in force. Qatar has a new treaty, which in India covers income arising from 1 April 2026. For any other country, check whether it is on the Income Tax Department’s list of tax treaties.
Three things are covered in other guides: tax on what you make when you sell is in how India taxes an NRI’s gains, sending money abroad is in our NRO repatriation guide, and which account to hold is in our NRE, NRO or FCNR guide.
Why part of your NRO interest goes as tax
You open your NRO statement and see that a good part of the interest went as tax before it reached you. An NRO account is the rupee account for income that arises in India, such as interest, rent or dividends. Three rules explain the deduction.
India may tax it. For a non-resident, India counts only income received in India or arising in India. Interest that an Indian bank pays on your NRO account is that kind of income, which is why India taxes it even though you live abroad.
The bank takes the tax first. Interest paid to a non-resident, including NRO interest, has tax deducted at source, or TDS: the bank takes the tax out before the money reaches you.
The default rate applies unless the treaty lowers it. For a non-resident Indian, the base rate deducted on NRO interest in 2026-27 is 30%. Surcharge and cess, two extra charges, are added on top of the base rate, so the total on your statement can be more than 30%. On dividends from Indian companies (the share of profit a company pays its shareholders), the default rate is 20%, also before surcharge and cess.
Interest on an NRE account, the account for money you earn abroad, is not taxed in India at all. So on India’s side, the treaty question is about your NRO interest and your dividends. If you live in the US, note one difference: the US taxes worldwide income, so even NRE interest is generally still taxable there.
Two governments, one rupee of interest
Your NRO interest has two governments with a reason to tax it. India has one because the interest arises in India. Your home country may have one because you live there. The US taxes its residents on their worldwide income, and a UK resident can be taxed in the UK on foreign income too.
A tax treaty is the agreement between the two governments that sorts this out, so the same income is not taxed twice. It does this with a different rule on each side.
Your NRO interest, earned in India
India's side
India may tax it: it arises in India.
The treaty's rule for India: take no more than the cap.
Your home's side
Your home country may tax it: you live there.
The treaty's rule for home: count the tax India took.
You, in the UAE There is no personal income tax, so there is nothing to count here.
- India’s side: a cap. India may still tax the interest, but the treaty caps how much, and India uses its own rate only where that is kinder to you.
- Your home side: a credit. Your home country may tax the interest too, but it counts the tax India took against its own tax on that income; this is called a foreign tax credit.
The two rules work differently. The cap changes the rate India takes. The credit leaves India’s tax as it is and reduces what you pay at home.
If you live in the UAE, the home side is empty: the UAE does not levy personal income tax, so for you India’s side is the whole story.
India’s side: you pay the lower of two rates
India’s tax law says its own rules apply only to the extent they are more beneficial to you than the treaty. So for each kind of income there are two rates, India’s own and the treaty’s cap, and the lower one applies.
The UAE treaty caps India’s tax at 12.5% on interest and 10% on dividends, for income that is really yours (the treaty’s term is “beneficial owner”). Here is how the two rates compare. India’s own rates are base rates, before surcharge and cess.
| Income | India’s own rate | The treaty cap | What applies |
|---|---|---|---|
| NRO interest, UAE resident | 30% | 12.5% | 12.5% |
| Dividends, UAE resident | 20% | 10% | 10% |
| Dividends, US resident | 20% | 25% | 20%: India’s own rate is lower, so it stays |
One year of Faisal’s interest
Faisal is made up for this guide, and the amount is illustrative. He works in Dubai on a UAE residence visa and has an NRO account in India. His NRO interest and the Indian tax on it are both in rupees, so nothing needs converting. The figures at India’s 30% are before surcharge and cess.
| Step | What happens |
|---|---|
| Faisal’s NRO interest for the year | INR 1,00,000 (illustrative) |
| At India’s base rate of 30% | INR 30,000 is deducted; Faisal receives INR 70,000 |
| At the UAE treaty cap of 12.5%, once he has his certificate and has filed Form No. 41 | INR 12,500 is deducted; Faisal receives INR 87,500 |
| If 30% was deducted anyway | The extra INR 17,500 comes back when he files an Indian return |
On this amount, the treaty is worth INR 17,500 to him in the year. The next two sections show how he claims it, and the two routes by which it reaches him.
How you claim it
You can claim the treaty rate only if you have a tax residency certificate (TRC) from your home country’s government and give the other details the law asks for. A TRC is your home country’s proof of where you are tax-resident. For income from the 2026-27 tax year, you give those other details in Form No. 41. Form No. 41 is a self-declaration: a form you fill in and file yourself. It holds the details India asks for to go with your certificate.- Get the certificate. In the UAE, it is issued by the Federal Tax Authority, the UAE’s tax authority, and you apply online through its EmaraTax portal. Elsewhere, it comes from your home country’s government.
- File Form No. 41 online. It can be filed only online, on the Income Tax e-filing portal: you register on the portal, submit the form and verify it. You can file it even without a PAN (India’s Permanent Account Number for tax); the portal has a separate registration category for non-residents without one.
- Keep the papers behind it. Keep the documents that back up what you put in Form No. 41, because the tax department may ask to see them.
- Do it again each tax year. You file Form No. 41 once in each tax year in which you claim the treaty rate.
- Ask your bank what it needs. Before your next interest date, ask your bank, or whoever pays you the income, which papers it wants from you.
Your bank, as the Indian payer, must deduct tax at the rate applicable, which is India’s own rate and not the treaty cap, if you have not filed a valid Form No. 41 online along with your certificate: without them, there is no treaty rate.
Dividends too. The same condition, a certificate plus the other details India asks for, applies when you claim the treaty rate on dividends.
Where the law leaves a point open, a dotted line marks each sentence that turns on it, and its “Our reading” label links to both readings, set side by side under “Points of interpretation” at the end.
If you live in the UAE and pay no UAE tax. You may wonder whether you still count as a UAE resident under the treaty. We read the treaty as defining a UAE-resident individual by days alone: at least 183 days in the UAE in the calendar year, with no test of whether you pay UAE tax.Our reading On that reading, the day count and a UAE certificate make you a treaty resident; a claim can still be questioned, so keep the certificate and a record of your days in the UAE.Our reading
The certificate is the entry ticket, not the whole claim: the treaty rate also depends on the Form No. 41 details, on the income really being yours, and on other conditions in the law.Our reading
If you are sorting out an earlier year. India’s Income-tax Act, 2025 came into force on 1 April 2026, and income from that date falls under it. Tax years that began before then stay under the old Income-tax Act, 1961. Under the 1961 Act, the form that went with the certificate was Form No. 10F.
The lower rate then reaches you in one of two ways: when the bank pays the interest, or later as a refund. The next section explains both.
When the lower rate reaches you: at the bank, or as a refund
Why the lower rate is possible at the bank. From the 2026-27 tax year, the law tells the bank to deduct tax on interest paid to a non-resident at the “rates in force”. It defines the rates in force as the rate in that year’s Finance Act (the yearly law that sets these rates; for NRO interest, the 30% above) or the rate in a tax treaty, whichever is applicable. So the treaty rate can be the rate your bank deducts when it pays the interest.
If the bank takes too much. If more tax is deducted than you owe for the year, you are entitled to the excess back. You claim it by filing an Indian return of income; every refund claim is made through a return.
Is the bank bound to use it? We read the law as leaving the bank to judge, from your certificate and Form No. 41, whether the treaty applies to you: a bank that accepts them deducts at the treaty rate, but one that is not satisfied may deduct at India’s full rate.Our reading If that happens, we read filing an Indian return to claim the excess as the route that stays open to you.Our reading Another reading is that once your certificate and Form No. 41 are in place, the bank is bound to deduct at the treaty rate; “Points of interpretation” at the end sets the two side by side. Both readings start from the same law: the treaty rate can be the rate your bank deducts.
Interest for the year (illustrative) INR 1,00,000
Which lane you are on depends on whether the bank accepts your papers.Our readingOur reading: We read the Act as making the treaty rate the deduction rate on your interest only where the treaty is applicable to you, and as leaving the payer to judge that from your tax residency certificate and the Form No. 41 you have filed online. On this reading a payer that is satisfied by them deducts at the treaty rate, but one that is not satisfied may deduct at the full domestic rate. If that happens, we read filing an Indian return to claim back the excess as the route that stays open to you. The competing reading: The Act defines the rate at which tax is deducted on your interest as the Finance Act rate or the rate in an applicable tax treaty, whichever is applicable, and it applies a treaty wherever the treaty is more beneficial to you. So once you hold your tax residency certificate and have filed Form No. 41 online, the treaty applies and the payer must deduct at the lower treaty rate; no refund claim is needed.
At the bank
- The bank deducts 12.5%, the treaty rate.
You receive INR 87,500
By refund
- The bank deducts 30%, India's base rate, before surcharge and cess. You receive INR 70,000.
- You file an Indian return, and INR 17,500 comes back.
In all INR 87,500
Where you live: will you be taxed again?
If you live in the UAE, there is no UAE personal income tax on this income, so India’s cap is all there is. For readers elsewhere, the table sets India’s cap beside what your home country does.
| What the treaty does | UAE (Gulf) | Singapore | United States | United Kingdom |
|---|---|---|---|---|
| InterestIndia's default 30% | 12.5% | 15% | 15% | 15% |
| DividendsIndia's default 20% | 10% | 15% | 25% | 10% |
| Taxed again where you live? | The United Arab Emirates does not levy personal income tax on individuals, so a UAE-resident NRI's salary and personal investment income are not taxed at home — the India-side rules dominate. | For a Singapore-resident individual, overseas income received in Singapore - including overseas income paid into a Singapore bank account - is generally not taxable, except in limited cases (for example income received through a partnership in Singapore). | A U.S. citizen or resident alien is taxed on worldwide income from all sources, so interest on Indian accounts — including NRE or FCNR interest that is exempt in India — is generally still taxable in the United States. | A UK resident is taxable in the UK on foreign income (and gains) that is also taxable in the UK, and may claim Foreign Tax Credit Relief for the Indian tax paid - limited to the lower of the Indian (or treaty) tax and the UK tax on that income. |
| How your home gives relief | The United Arab Emirates does not levy personal income tax on individuals, so a UAE-resident NRI's salary and personal investment income are not taxed at home — the India-side rules dominate. | Under the India-Singapore tax treaty, Singapore allows Indian tax paid on income from Indian sources as a credit against Singapore tax on that income (subject to Singapore's own credit rules), so relief for a Singapore-resident NRI comes as a foreign tax credit. For a Singapore-resident individual, overseas income received in Singapore - including overseas income paid into a Singapore bank account - is generally not taxable, except in limited cases (for example income received through a partnership in Singapore). | Under the India-US tax treaty, the United States allows a US resident or citizen a credit against US tax for the income-tax paid to India, so relief for a US-resident NRI comes as a foreign tax credit rather than an exemption. | A UK resident is taxable in the UK on foreign income (and gains) that is also taxable in the UK, and may claim Foreign Tax Credit Relief for the Indian tax paid - limited to the lower of the Indian (or treaty) tax and the UK tax on that income. |
Country by country
- Singapore. India’s tax is capped at 15% on interest and 15% on dividends. Overseas income you receive in Singapore is generally not taxed there, with limited exceptions. Where Singapore does tax it, it gives credit for the Indian tax.
- The US. India’s tax on interest is capped at 15%. On dividends the cap is 25%, above India’s own 20%, so 20% stays. The US taxes worldwide income, so the same interest is generally taxable there too. The US gives a credit against US tax for the tax paid to India.
- The UK. India’s tax is capped at 15% on interest and 10% on dividends. The UK taxes the income too and gives Foreign Tax Credit Relief for the Indian tax, up to the lower of the Indian tax and the UK tax on that income.
What to do
Without the form and the certificate, there is no treaty rate.
If you live in the US or the UK, a lower rate in India does not mean no tax at home; see “Where you live” above.
When you are ready, we will take you through the steps in this guide for your own case; your accountant handles any Indian return. One question is enough to start: ask Rohit in the question box on this page.
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Points of interpretation
Where the rule leaves room for more than one reading, we say so and show both.
Whether a valid tax residency certificate by itself secures treaty relief, or whether further conditions must also be met.
A TRC is necessary but not by itself sufficient: the Act also requires the prescribed Form No. 41, and the treaty is given only to the extent more beneficial and subject to beneficial-ownership and anti-abuse conditions (the general anti-avoidance rules apply even where not beneficial). We read treaty relief as conditional on more than the TRC alone.
A tax residency certificate is the document the statute names, and it has long been treated as the key evidence of residence for claiming treaty relief, so a non-resident may expect that a valid TRC is what is needed.
Whether, once you hold a tax residency certificate and have filed Form No. 41 online, the payer is bound to deduct tax on your Indian interest at the lower treaty rate, or whether you should expect the full domestic rate to be deducted and claim back the excess through an Indian return.
We read the Act as making the treaty rate the deduction rate on your interest only where the treaty is applicable to you, and as leaving the payer to judge that from your tax residency certificate and the Form No. 41 you have filed online. On this reading a payer that is satisfied by them deducts at the treaty rate, but one that is not satisfied may deduct at the full domestic rate. If that happens, we read filing an Indian return to claim back the excess as the route that stays open to you.
The Act defines the rate at which tax is deducted on your interest as the Finance Act rate or the rate in an applicable tax treaty, whichever is applicable, and it applies a treaty wherever the treaty is more beneficial to you. So once you hold your tax residency certificate and have filed Form No. 41 online, the treaty applies and the payer must deduct at the lower treaty rate; no refund claim is needed.
Whether a UAE resident who pays no personal income tax is still a treaty 'resident' of the UAE entitled to the lower Indian treaty rate.
We read the India-UAE treaty as defining a UAE-resident individual only by presence in the UAE for at least 183 days in the calendar year, with no test of whether UAE tax is paid; the liable-to-tax test in the treaty is written for India's side alone. On this reading an individual who meets that day count and holds a UAE tax residency certificate is a treaty resident entitled to the lower Indian rate. A claim can still be questioned, so keep the certificate and a record of your days in the UAE.
A tax treaty is meant for people who are liable to tax in the country where they live, and the same treaty defines an Indian resident by that very test. Because the UAE levies no personal income tax, a UAE-resident individual is not liable to tax there, so India may refuse the lower treaty rate and deduct at its full domestic rate.
Sources
- Income-tax Act, 2025 (Act 30 of 2025, as amended by the Finance Act, 2026)
- Section 159(1) and (3)(a)-(b) (Agreement with foreign countries or specified territories; double taxation relief)
- Income-tax Act, 2025 (Act 30 of 2025)
- Section 5(2)(a)-(b) (Scope of total income - non-resident), Chapter II - Basis of Charge
- Income-tax Act, 2025 (as amended by Finance Act, 2026)
- Section 159(4)
- Section 159(8)
- Section 1(3)
- Section 159(8), read with section 159(4) and (6)
- The Finance Act, 2026, First Schedule
- First Schedule (See sections 2 and 3), Part II (Rates for deduction of tax at source), item 1(b)(i) (person not resident in India — in the case of a non-resident Indian), sub-item (O): on the whole of the other income — rate column 30%
- First Schedule (See sections 2 and 3), Part II (Rates for deduction of tax at source), item 1(b)(i) (non-resident Indian), sub-item (N) 'on income by way of dividend other than the income referred to in sub-item (b)(i)(M)'
- Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026
- Schedule IV [See section 11], Serial No. 1 (nature of income col. B: 'Any income by way of interest'; condition col. D)
- India-Saudi Arabia Double Taxation Avoidance Agreement (Convention)
- Notification GSR 645(E), dated 17-10-2006 (preamble to the Convention; entry into force under Article 28)
- India-Kuwait Double Taxation Avoidance Agreement
- Notification S.O. 2000(E), dated 27-11-2007, as amended by S.O. 1823(E), dated 4-5-2018 (preamble; entry into force under Article 30)
- India-Oman Double Taxation Avoidance Agreement
- Notification S.O. 563(E), dated 23-9-1997 (preamble; entry into force under Article 29(1))
- India-Qatar Double Taxation Avoidance Agreement and Protocol (2025)
- Notification G.S.R. 789(E), dated 24-10-2025 (recitals on entry into force and effect, citing Article 30(2) and (3))
- India-UAE Double Taxation Avoidance Agreement (Agreement for avoidance of double taxation with UAE)
- Article 11 (Interest), paragraph 2(b) (and 2(a) for the 5% bank-loan case)
- Article 10 (Dividends), paragraph 2
- Article 4 (Resident), paragraph 1(b) (definition of a UAE resident individual), read with paragraph 1(a) (India's 'liable to tax' test)
- India-Singapore Double Taxation Avoidance Agreement (Comprehensive Agreement)
- Article 11 (Interest), paragraph 2(b) (and 2(a) for the 10% bank-loan case)
- Article 10 (Dividends), paragraph 2(b) (and 2(a) for the 10%, 25%-holding company case)
- Article 25 (Avoidance of Double Taxation), paragraph 4
- India-US Double Taxation Avoidance Agreement (Convention)
- Article 11 (Interest), paragraph 2(b) (and 2(a) for the 10% bank-loan case)
- Article 10 (Dividends), paragraph 2(b) (and 2(a) for the 15%, 10%-voting-stock company case)
- India-UK Double Taxation Avoidance Agreement (Convention)
- Article 12 (Interest), paragraph 2 (and 3(a) for the 10% bank case)
- Article 11 (Dividends), paragraph 2(b) (and 2(a) for the 15% property-vehicle case)
- Income-tax Rules, 2026, Rule 75
- Rule 75(1)
- Income-tax Rules, 2026, Rule 75
- Rule 75(2)
- Form 41 - Frequently Asked Questions (Information to be provided under section 159(8) of the Act)
- FAQ 5 (How many times can Form 41 be filed in a year?), read with FAQ 1 (self-declaration) and FAQ 10 (no PAN)
- FAQ 11 (Can Form 41 be filed offline?), read with FAQ 12 (process flow: registration, submission, verification)
- FAQ 13 (Why is Form 41 important?), consequence (a)
- Income-tax Act, 2025 (Act 30 of 2025, as amended by the Finance Act, 2026)
- Section 536 (Chapter XXIII - Miscellaneous; Repeal and savings): sub-section (1) repeals the Income-tax Act, 1961; sub-section (2)(a) and (c) save its prior operation and proceedings
- Income-tax Rules, 1962, Rule 21AB
- Rule 21AB(1)
- Income-tax Act, 2025 (Act 30 of 2025, as amended by the Finance Act, 2026)
- Section 431 (Chapter XX - Refunds)
- Income-tax Act, 2025
- Section 433 (Chapter XX - Refunds), read with section 263 (Return of income)
- Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026
- Section 393(2), Table Serial No. 17 (recipient: any non-resident (not being a company) or a foreign company; rate column: Rates in force)
- Income-tax Act, 2025 (Act 30 of 2025)
- Section 393(2), Table 'For payments to non-resident', Sl. No. 17: column B (nature of income or sum), column C (payee), column D (payer), column E (rate); Chapter XIX
- Income-tax Act, 2025 (Act 30 of 2025)
- Section 2(90)(c) (definition of 'rate or rates in force' for deducting tax under section 393(2), Table Sl. Nos. 6, 7, 8, 9 and 17), Chapter I - Preliminary
- Section 2(90)(c) (definition of 'rates in force' for deducting tax under section 393(2), Table Sl. No. 17), read with section 393(2) Table Sl. No. 17 (rate column 'Rates in force') and section 159(8) (relief only with a residence certificate and the prescribed documents)
- U.S. Citizens and Resident Aliens Abroad
- Introductory paragraph ('Taxpayers with foreign financial accounts' / worldwide-income statement)
- India-United States DTAA (Comprehensive Agreement)
- Article 25(1)(a) (Relief from Double Taxation)
- Relief for foreign tax paid 2026 (Self Assessment helpsheet HS263)
- 'Eligibility for relief' and 'The tax credit in the UK is the lower of'
What changed
- 27 October 2026
- First version.
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