Lesson

Freistellungsauftrag 2027: the saver's allowance across German and Indian accounts

How the German saver's allowance works, what an exemption order at a German bank does and doesn't cover, and why interest and fund income from India are handled in the tax return instead.

3 min read · Reviewed on 28 September 2026 by the founder

Made with AI assistance, reviewed by inWst

The idea in one line

The German saver's allowance covers capital income from anywhere, but an exemption order only works at German banks, so income from Indian accounts meets the allowance in the tax return, and only the part the German orders have not used up.

Why it matters

Every person taxed in Germany gets a saver's allowance (Sparer-Pauschbetrag) on capital income: €1,000^[1] a year, or €2,000^[1] for spouses assessed jointly (§ 20(9) EStG). Actual costs cannot be deducted on top, and the allowance can never be larger than the capital income itself.

A Freistellungsauftrag (exemption order) tells a German bank not to withhold tax on your capital income up to the amount you give it. All orders across all German institutions together may not exceed the allowance (§ 44a EStG). The order needs your tax identification number, and for a joint order your spouse's too. Banks report once a year, by the end of February, how much they actually exempted, and the Federal Central Tax Office (BZSt) uses these reports to spot orders that add up to more than the allowance.

An Indian bank is not a German withholding agent. A German exemption order has no effect there, and no German tax is taken at source on NRO or NRE interest, Indian dividends or Indian fund income. That income belongs in the German return instead (§ 32d(3) EStG), and the allowance is set against it there. The catch: if the orders at German banks already use the full allowance, nothing is left for the Indian income.

How to check yours

Two numbers, for the same calendar year, are enough for a first look:

how much of the allowance the orders at German banks are set to use, and how much they actually used (bank tax certificates show it);
the capital income from India, converted to euros: interest, dividends, fund payouts and any Vorabpauschale.

The free Indian income checker asks how much of the allowance is already used at German banks and shows where each Indian item generally goes in the return.

What people commonly do

Many guides suggest looking at exemption orders before the turn of the year, because an order applies to income received in the year it covers. For 2027 there is a specific reason: the Vorabpauschale for 2026 on funds held at German banks counts as received on 4 January 2027, so it is the 2027 order, not the 2026 one, that can cover it.

A common rule is to spread the orders across German banks roughly in line with the income each one pays, since an unused order at one bank does not help at another during the year. When too little was exempted and a German bank withheld tax, the return can still claim the unused part of the allowance (§ 32d(4) EStG). How much of the allowance to leave free for Indian income is a personal judgement, and individual cases are a question for a Steuerberater.

Cross-border twist

The two countries count differently. Germany looks at the calendar year and converts rupee income to euros; India looks at its April to March tax year and has its own rules for NRO interest and fund income. Indian tax already deducted on the same income does not reduce the German allowance; it is a separate question of credit, handled with the Indian tax certificates. A tax-free item in India, such as NRE interest, can still be capital income in Germany and so still uses up the German allowance.

Sources

60-second video script

Hook: Your Freistellungsauftrag covers your German bank. Does it cover your Indian account?

Point 1: Germany gives every saver a yearly allowance on capital income: €1,000^[1], or €2,000^[1] for a couple assessed jointly.

Point 2: An exemption order only works at German banks. Interest and fund income from India go into your German return, and the allowance counts there only if the German orders haven't used it all.

Point 3: For 2027, funds at German banks get their Vorabpauschale on 4 January, so the 2027 order is the one that counts. Individual cases are a question for a Steuerberater.

Call to action: Check where your Indian income goes with the free checker at inwst.com/tools/indian-income.