Interest on an NRI joint account can be taxed in both India and the US, but the foreign tax credit means you shouldn't pay full tax twice. India deducts tax first, and you claim it back on your US return, only up to the treaty rate. The catch is what happens above that rate.
How an NRI joint account is taxed in India
Account type decides the Indian side. Interest on an NRO account is always taxable in India, and the bank deducts TDS at 30% plus 4% cess, with surcharge where it applies.
That deduction sits under section 393(2) of the Income-tax Act, 2025 (section 195 before 1 April 2026).
Interest on an NRE account isn't taxed in India while you're an NRI or RNOR. A joint NRE account needs an NRI or OCI co-holder, so a resident spouse can't join it. A joint NRO account can include a resident Indian.
Whose income it is in India
India generally taxes the interest on the person who owns the money, not on whoever the bank lists first. A bank may report the TDS under one holder's PAN, so the credit can sit on the wrong person's record. Check which PAN carries the TDS in your Annual Information Statement.
How the US taxes the same interest
The US taxes citizens, green card holders and resident aliens on worldwide income. Indian bank interest belongs on your US return even when no Form 1099 arrives. The IRS says each person's share of joint-account interest follows local law, and spouses filing jointly report the full amount together anyway.
The foreign tax credit on Form 1116
Article 25 of the India-US tax treaty lets a US taxpayer credit income tax paid to India against US tax. You claim it on Form 1116 in the passive category, where bank interest sits. The credit can't exceed the US tax on that income.
The credit also can't exceed what the treaty lets India collect. Article 11 caps India's tax on interest at 15%, or 10% when it's paid on a loan granted by a bank. The IRS Form 1116 instructions say tax you didn't legally owe, including amounts you can get refunded, isn't creditable.
The simplified no-form route usually isn't open here. It needs all your foreign income reported on a payee statement such as Form 1099-INT, and Indian banks don't issue one, so expect to file Form 1116.
A worked example on a joint NRO account
Priya and Arjun are US tax residents filing jointly. Their joint NRO account is funded by Arjun's rental income in India and earns ₹4,00,000 of interest in a year. I've assumed a 24% US bracket and no Indian surcharge.
- India deducts TDS at 31.2% (30% plus 4% cess), which is ₹1,24,800.
- The 15% treaty cap puts India's tax at about ₹60,000, so about ₹64,800 is excess.
- US tax at 24% on the interest is ₹96,000, so the credit is ₹60,000 and ₹36,000 is left to pay.
- Total tax comes to ₹96,000, which is the US rate, because India's share was credited.
- Skip the Indian refund and the excess stays lost, taking total tax to about ₹1,60,800.
Two things change the picture. In a 12% US bracket the credit stops at about ₹48,000, and the unused part can be carried back one year or forward up to 10 years. The refund also only comes through an Indian return, so skipping it costs real money.
Where you can still be taxed twice
Four gaps leave interest taxed twice in practice.
- Whatever India withheld above the treaty rate stays with India until you claim it back.
- To get the lower rate at source, you generally need a tax residency certificate and Form 10F.
- Credit above your US tax on that income can't be used this year, so a low bracket wastes some of it.
- The credit trail breaks when the tax certificate names someone who doesn't own the money.
Who this applies to
This applies if you're a US citizen, green card holder or resident alien and earn interest on an NRO account. It doesn't apply to a nonresident alien, because the US taxes them only on US-source income.
An NRE account has nothing to credit. India taxes none of the interest, and the US taxes all of it.
What to do about it
Work through these in order.
- Confirm whether the account is NRO or NRE, and whose money funds it.
- Check which PAN carries the TDS in your Annual Information Statement.
- Give the bank a tax residency certificate and Form 10F if you want the treaty rate.
- File an Indian return to claim back any TDS above the treaty rate.
- Claim the credit on Form 1116.
- Report the account on your FBAR if combined foreign accounts passed $10,000 at any point in the year.
That last step is separate from tax. Each joint owner reports the entire account value on the FBAR, not a share, and spouses can file one report together by signing Form 114a.
How I'd title the account
I'd put the person who owns the money first on the account. If two people's funds are mixed, I'd open two accounts. Both countries ask whose money it is, and a mixed account makes you prove the split twice.
Your next step
I'd start with this year's TDS statement. Check which PAN carries the tax and whether the bank used the treaty rate. If the statement doesn't match who owns the money, fix the account before the next interest credit, and InvestMates can work through the credit and the FBAR with you.
Frequently asked questions
Can you be taxed twice on the same income?
Yes, two countries can tax the same interest, but treaty credits are built to remove the overlap. India taxes the interest at source and the US credits that tax. The same logic covers Indian fixed deposits held by US taxpayers.
Who pays tax on joint account interest in India?
The person who owns the money pays the tax on joint account interest in India, even if the bank reports the TDS under one holder's PAN. Keep a record of who deposited what. Mixed funds are where disputes start.
What is the TDS rate on interest on an NRO account in India?
The bank deducts 30% plus 4% cess on NRO account interest, with surcharge where it applies. A tax residency certificate and Form 10F may bring this down to the treaty rate, which is 15% for most interest under Article 11.
Does a secondary holder on an NRO joint account owe US tax on the interest?
A secondary holder owes US tax only on their own share of the NRO interest, and that share follows local law and who owns the funds. A spouse filing jointly reports the whole amount. Even a holder with no taxable share may still need an FBAR, and Form 8938 can apply too.
Can you claim a foreign tax credit for Indian tax above the treaty rate?
No, you can't claim a foreign tax credit for Indian tax above the treaty rate. The IRS allows credit only for tax you legally owe. Claim the excess back from India, then credit the rest on Form 1116.