I am in NRI based in the UK. I had invested in company bonds 2 years back via NRE account and recently found the company was deducting TDS on interest paid. Are they not tax free?

When you hold an NRE account in India, only the interest earned on the NRE account is tax-free and hence does not attract any TDS. As per the Income Tax rules, any company paying interest on its company FDs or company bonds is required to deduct tax at source (TDS) and only pay the net amount to the investor. This rule is not only applicable to NRIs but also to resident Indians.

You will have to claim refund when you file your returns in case you are not liable to tax in that particular year. But TDS is inevitable since the IT Act mandates deduction of 20% TDS for NRIs on any company debt paper.