Indian FD Interest and German Taxes: What Every NRI in Germany Must Know

You moved to Germany, set up your life here, and your Fixed Deposit back in India is quietly earning interest. You figure the Indian bank already deducted TDS, so you are done.

You are not done.

If you are a tax resident of Germany — which you become after living here for more than 183 days in a calendar year — you must declare your worldwide income to the German Finanzamt. That includes every rupee your FD earns, whether or not India already taxed it.

This surprises most Indians. Let us walk through exactly what you owe, how the DTAA credit works, and what happens if you ignore it.

The Fundamental Rule: Worldwide Income

Germany taxes residents on their worldwide income (Welteinkommen). This is not optional and there are no thresholds. A ₹50,000 FD earning ₹3,500 in annual interest must be declared. A ₹50 lakh FD earning ₹3.5 lakh? Absolutely must be declared.

The good news: you are not taxed twice in full. The India-Germany DTAA (Double Taxation Avoidance Agreement) ensures that Indian tax you already paid — specifically TDS — is credited against your German tax liability. You pay the difference, not double.

NRE vs NRO: Two Very Different Tax Treatments

This is where most Indians get confused. The type of account your FD is in changes everything.

NRE Fixed Deposits

NRE (Non-Resident External) accounts hold money you earned abroad and remitted to India. Interest on NRE FDs is fully tax-free in India — no TDS, no income tax, no Form 26AS entry.

Here is the trap: NRE interest is fully taxable in Germany.

Because India does not tax it, there is no TDS to claim as a credit. You owe German tax on the full interest amount, at your marginal rate. For someone in the 30–35% bracket, that means roughly €30–€35 in German tax for every €100 of NRE interest earned.

Many Indians assume "tax-free" means globally tax-free. In German law, NRE interest is treated like any other foreign interest income.

NRO Fixed Deposits

NRO (Non-Resident Ordinary) accounts typically hold Indian-source income — rent, dividends, pension, salary earned in India. Interest on NRO FDs is taxable in India, and your bank deducts TDS at 30% (or 10% with a lower withholding certificate).

This is actually the better situation for you as a Germany resident. Because India has already taxed the interest, you can claim that TDS as a DTAA credit against your German tax bill.

Germany taxes the interest at your marginal rate — but then subtracts what you paid India. You only pay the difference.

Worked Example: ₹5,00,000 NRO FD at 7%

Let us put real numbers to this.

Your FD: ₹5,00,000 (approximately €5,500) at 7% annual interest Interest earned: ₹35,000 (~€390 at ₹90/€) TDS deducted by Indian bank (NRO, 10%): ₹3,500 (~€39)

Now in Germany:

• Your marginal income tax rate: 30%
• German tax on €390 interest: €117
• DTAA credit (the €39 TDS you paid India): −€39
• Net additional German tax: €78

So you do not pay €117 on top of the Indian TDS. You pay €78. The credit mechanism ensures you only pay the higher-country rate on top of the lower-country rate.

Without declaring this income, you risk the Finanzamt discovering it later — and charging back taxes plus a penalty of up to 10% of unpaid tax, plus interest at 1.8% per year.

For a realistic FD portfolio of ₹20–50 lakh, the undeclared amount compounds quickly.

Which German Tax Form Do You Use?

This catches people out when they try to file themselves.

Indian FD interest does not go on Anlage KAP (the German form for investment income like German bank interest, dividends from German stocks).

It goes on Anlage AUS — the form for foreign income. Specifically, it goes in the section for interest income from a country with a DTAA (India qualifies).

If you file via ELSTER directly, you will need to fill in:

• Country: India
• Income type: Interest
• Gross amount in euros (convert at the annual average ECB rate)
• Tax paid abroad (your TDS, converted to euros)

The software then calculates the credit automatically.

Documents You Need

Before you sit down to file, gather these:

From your Indian bank:

• Annual interest certificate (issued each March for the financial year)
• TDS certificate (Form 16A) — this is your proof of tax paid in India

From the Indian income tax portal:

• Form 26AS — shows all TDS deducted in your PAN, including bank TDS
• AIS (Annual Information Statement) — a more detailed version showing all reported interest

Exchange rate:

• Use the annual average EUR/INR rate published by the ECB or Deutsche Bundesbank for the relevant tax year

Keep these documents for at least 10 years. The German Finanzamt can audit returns up to 10 years back.

Common Mistakes Indians Make

1. Skipping NRE interest entirely Because India does not tax it, many Indians assume Germany does not either. This is incorrect. Declare all NRE interest at full value — there is no DTAA credit, but there is also no double taxation, just German tax.

2. Using the wrong exchange rate Using the rate on the day you received interest instead of the annual average leads to discrepancies. Use the Deutsche Bundesbank's annual average rate for EUR/INR.

3. Putting it on Anlage KAP instead of Anlage AUS The Finanzamt notices. Interest from foreign accounts with DTAA treatment always goes on Anlage AUS.

4. Not filing at all because "the amount is small" There is no minimum threshold in German tax law for foreign income. A €50 interest income must be declared. The Finanzamt has been receiving automatic data from Indian banks under the CRS (Common Reporting Standard) since 2017.

5. Forgetting FDs in the name of a family member If your spouse or parents hold an FD and remit the interest to you, or if you are the beneficial owner, you may still be liable. Seek advice on beneficial ownership rules if your situation is complex.

How TaxDost Handles This

Manually filling in Anlage AUS, converting currencies, finding the right DTAA article, and calculating the credit is genuinely complex. It is the part that trips up even experienced tax filers.

TaxDost is built specifically for this scenario. You enter your Indian interest income in the interview, upload your Form 26AS or interest certificate, and TaxDost:

• Converts the amount to euros at the correct annual average rate
• Identifies whether it is NRE or NRO income (different treatment)
• Applies the correct DTAA Article 11 credit for NRO interest
• Generates the correct Anlage AUS entries
• Shows you the exact net additional German tax before you file

No more guessing which form. No more overpaying because you missed the credit.

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Calculate how much Indian FD interest costs you in German taxes — and how much DTAA saves you.

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This article is for informational purposes only and does not constitute legal or tax advice. Individual circumstances vary — consult a qualified tax advisor (Steuerberater) for complex situations.