Seeking clarification on taxability of interest on nro depos

Dear All,

Can Some one clarify me the Taxability of Interest earned on NRO Bank deposits, for a "Resident but not ordinary reisdent" - returned to India during the previous year in May 2011, - Bankers have carried out TDS . 

It seems there is circulars to levy Tax at flat rate of 12.5 % + cess - is it true? can some one clarify the correct posiion of taxability quoting relevant provisions. 

Regards

V.R.Murali