NRI Tax on Rental Income from Indian Property

Many NRIs continue to own property in India — a family home, an inherited flat, or an investment bought before moving abroad — and rent it out rather than sell it. That rental income is taxable in India regardless of where the owner lives, and it comes with a TDS mechanism that catches both landlords and tenants off guard. Here's how it actually works.
 

Is Rental Income from Indian Property Taxable for NRIs?

Yes. Any income earned from a property located in India is taxable in India under the head "Income from House Property," irrespective of the owner's residential status. The fact that the NRI lives abroad, holds a foreign passport, or receives the rent into an overseas account does not change this — what matters is where the property is situated, not where the owner resides.
 

How Is the Taxable Rental Income Calculated?

The computation follows the same structure as it does for resident landlords:

- Gross Annual Value (GAV): The actual rent received or the reasonable expected rent, whichever is higher.

- Less: Municipal taxes paid during the year (only if paid by the owner, not the tenant).

- Net Annual Value (NAV): GAV minus municipal taxes.

- Less: Standard deduction of 30% of NAV — allowed automatically for repairs and maintenance, regardless of actual expenses incurred.

- Less: Interest on home loan (Section 24(b)), if the property was purchased with a loan — the full interest amount can be claimed if the property is let out, with no upper cap for a rented property (unlike the ₹2 lakh cap that applies to a self-occupied property).

What remains after these deductions is added to the NRI's total taxable income in India and taxed at applicable slab rates.
 

TDS on Rent Paid to NRI Landlords — The Part That Surprises Everyone

This is where NRI rules diverge sharply from resident rules. When a tenant rents property from a resident landlord, TDS under Section 194-I only applies once monthly rent crosses ₹50,000, and even then at 10%. When the landlord is an NRI, none of that applies. Instead, Section 195 governs the deduction, and it works very differently:

1. No threshold at all. TDS must be deducted from rupee one, no matter how small the monthly rent is.

2. Flat rate of 31.2% (30% tax plus 4% health and education cess) on the gross rent paid — not on the net taxable income after deductions. Surcharge may additionally apply if the NRI's total Indian income exceeds ₹50 lakh.

3. The tenant is responsible, not the landlord. The tenant must obtain a TAN, deduct TDS at every rent payment, deposit it with the government, and file the appropriate TDS return.

4. Form 15CA (and 15CB above certain thresholds) may also apply when the rent is remitted, since it's a payment to a non-resident.

In practice, many tenants — especially individuals renting a flat for personal use — aren't aware of this obligation and either fail to deduct TDS altogether or deduct it at the resident rate, both of which create compliance problems down the line for the tenant, not just the landlord.
 

Getting a Lower TDS Certificate

Because TDS is deducted on the gross rent while the NRI is only actually taxed on the net amount after the 30% standard deduction and other allowances, the tenant often ends up over-deducting relative to the landlord's real liability. To avoid this mismatch — and avoid waiting for a refund at the time of filing — an NRI landlord can apply for a Lower or Nil TDS Certificate under Section 197 by filing Form 13 with the Assessing Officer (International Taxation). Once granted, the tenant deducts tax at the reduced rate specified in the certificate instead of the full 31.2%.
 

Can DTAA Reduce This Further?

TDS under Section 195 must be deducted regardless of any Double Taxation Avoidance Agreement, since the income is sourced in India and chargeable to tax here either way. However, the rate applied can follow whichever is more beneficial — the Finance Act rate or the DTAA rate — and any excess deducted can be claimed as a refund when filing the Indian tax return, along with credit claimed in the country of residence to avoid being taxed twice on the same income.

Filing Requirements for NRIs Earning Rental Income

An NRI must file an Income Tax Return in India if total Indian income (including rent) exceeds the basic exemption limit, even if TDS has already been deducted.

Filing is also the only way to claim a refund if TDS deducted exceeds actual tax liability — which is common given the flat 31.2% deduction rate.

Rental income should be reported along with details of TDS deducted, as reflected in Form 26AS.
 

Quick Checklist for NRI Landlords

1. Confirm your tenant is deducting TDS under Section 195, not Section 194-I

2. Track municipal taxes paid and home loan interest to maximize allowable deductions

3. Consider applying for a Lower TDS Certificate if the flat rate significantly overshoots your actual liability

4. File your Indian ITR to claim any TDS refund and formally report the income

5. Check your DTAA position with your country of residence to avoid double taxation

6. Rental income is one of the more routine sources of India income for NRIs, but the TDS mechanics around it are anything but routine. Getting the deduction rate and filing right the first time avoids both overpayment and compliance notices later.
 

Have a property in India generating rental income and unsure whether your tenant is deducting TDS correctly? Reach out to our team for a review of your rental TDS and filing position.
 

Reference: Old vs New Section Numbers

Note: The 2025 Act consolidates most TDS provisions into fewer, table-based sections rather than the scattered standalone sections used in the 1961 Act. Secondary sources currently show some inconsistency in the exact new numbering for non-resident TDS and lower-deduction certificate provisions, since the Act only took effect from 1 April 2026 — we'd recommend confirming these against the official Act text or with a CA before this table is relied on for filing purposes.

Written by: Admin Service: Taxation Services Date: 15 Sep, 2026 Tags: Rental Income, NRI Tax, Section 195, TDS, House Property