Look at any Indian bank's NRI rate card. SBI lists 6.25% to 6.80% on a 1 to 2 year FD. HDFC and ICICI are nearly identical. The same rate applies to NRE and NRO. Every bank treats them as the same product on the rate card.
On the NRO side, 30% gets withheld before interest reaches your account. That is TDS (Tax Deducted at Source). A $50,000 NRO FD at 7% earns $3,500 on paper, but $2,450 lands in the account. Your effective return drops from 7% to 4.9%.
The 30% rate is the default, not the requirement. Article 11 of the India-US DTAA caps TDS at 15% for US residents. The bank does not apply that rate automatically. You have to claim it. The paperwork is one IRS form, one Indian form and one annual renewal.
On that same $50,000 NRO FD, dropping TDS from 30% to 15% saves $525 a year in Indian withholding alone. The comparison below shows the full result after the US Foreign Tax Credit.
The three forms, in order
Step 1 is Form 8802, on the US side. It is the IRS application that gets you Form 6166, your Tax Residency Certificate. The fee is $85. You can list multiple tax years on one application at no extra cost. Processing takes 45 days minimum, so file at least 45 days before you need it.
IRS funding pressure is slowing processing in 2026. If your NRO FD rolls over in the next 60 days, file now.
Step 2 is Form 10F, on the India side. Once your TRC arrives, file Form 10F on the Indian income tax portal. Electronic filing has been mandatory since October 2023, and paper gets rejected. You do not need a PAN. Register under "Non-residents not holding and not required to have PAN," attach the TRC and verify by OTP.
Step 3 is to submit both to your Indian bank. Send the TRC and Form 10F acknowledgment to your bank's NRI desk before the next interest credit date. The bank applies 15% from there. You claim back anything already withheld at 30% on your Indian return.
Both renew yearly. The TRC covers one fiscal year. When it expires, Form 10F goes with it. Your bank reverts to 30% the day after, and most NRIs don't catch it until next year's filing.
There is still a US tax bill
The IRS taxes worldwide income, so NRE, NRO and FCNR interest all go on Schedule B at your ordinary rate. NRE and FCNR have no Indian tax, so the US bill is straightforward. NRO had Indian tax withheld. You claim that as a Foreign Tax Credit on Form 1116, offsetting your US bill dollar-for-dollar.
This is why the DTAA paperwork matters more than the $525 alone suggests. With Form 10F filed, India withholds 15% and the IRS credits it fully. Without it, India withholds 30%, but the US Foreign Tax Credit is generally capped at the 15% treaty rate. The extra 15% paid in India is not fully recoverable. You are paying tax twice on the same income.
₹1 crore at 7%, after one year
| NRE | NRO 30% | NRO 15% | |
|---|---|---|---|
| Effective TDS | 0% | 31.20% | 15.60% |
| Indian Tax | ₹0 | ₹2,22,376 | ₹1,11,643 |
| US Tax (after FTC) | ₹1,72,462 | ₹0 | ₹60,116 |
| Total Tax | ₹1,72,462 | ₹2,22,376 | ₹1,71,759 |
| Net Interest Kept | ₹5,46,129 | ₹4,90,368 | ₹5,43,903 |
| Net Kept (USD) | $5,783 | $5,193 | $5,760 |
| Effective Yield | 5.46% | 4.90% | 5.44% |
₹1 crore principal, 7% nominal, quarterly compounding, US 24% bracket. NRO 30% = no DTAA paperwork on file (Section 195 default). NRO 15% = Form 8802 + Form 10F filed (treaty rate, Article 11). USD at ₹94.43.
Start with NRE against NRO with the paperwork. "NRE pays a higher effective rate than NRO" is not true for an NRI who files the DTAA paperwork. On net interest kept, NRE retains ₹5,46,129 and NRO at 15% retains ₹5,43,903. That is a gap of ₹2,225 (about $23) on a ₹1 crore deposit, which is too small to matter. What you lose to Indian tax on NRO 15%, you recover on the US side via the FTC. The accounts are tax-equivalent.
The larger gap is between NRO with the paperwork and NRO without it. Compare NRO 15% (₹5,43,903) with NRO 30% (₹4,90,368). The difference is ₹53,535 (about $567) per ₹1 crore per year. That is the cost of skipping the filing. India withholds 30% by default, but the IRS only credits foreign tax up to the 15% treaty cap. Everything beyond the cap is paid to India and refused by the IRS.
The "carryforward" does not fix this. Excess foreign tax carries forward 10 years on Form 1116, but using it requires a future year where you paid less Indian tax than the US owes. That happens only once you stop over-withholding, and you stop over-withholding only by filing the paperwork. The reasoning is circular, so the carryforward is a footnote rather than a fix.
The calendar
The paperwork is not hard, but the timing gets missed. Work backward from the date your bank credits interest.
- At least 45 days before, Form 8802 goes to the IRS. File earlier in 2026, with processing running slow.
- When Form 6166 arrives, file Form 10F on the Indian income tax portal, with the certificate attached.
- Before the interest credit date, send the certificate and Form 10F acknowledgment to your bank's NRI desk.
- Every year after, do all of it again. Nothing reminds you, and the bank does not call. It goes back to 30%.
NRE and NRO pay the same rate. NRO loses 30% to TDS upfront. If you file the DTAA paperwork, it drops to 15%, and the US Foreign Tax Credit refunds the rest. If you skip it, about $567 per ₹1 crore stays in India every year.
If you're not sure the money belongs in NRO at all, start with Three accounts, two questions, one right answer.
Playbook Move: Most cross-border CPAs charge $200 to $400 to file Form 8802 and prepare Form 10F annually. On a ₹1 crore NRO balance at 7%, the paperwork saves about $567 a year, paying for itself in three months and continuing every year after. Set a calendar reminder for both forms. They expire without notice, and the day they do, your bank reverts to 30%.
From Edition 2 of the NRI Playbook newsletter. For informational purposes only; not financial, tax, or legal advice. For decisions about your specific situation, consult a qualified cross-border tax professional.