Taxability of interest on nro deposits

Hi,

One of my client, has interest income from NRO Deposit and Banks have carried out TDS. He has returned to India for Good in April 2011. He says there is a circular / notification / provision in IT Act, etc to levy income tax on Interest income from NRO deposits at lower rate  @ 12.5% . Is it so?

Can some one clarify the issue and provide the the source if any. 

Regards

V.R.Murali