TDS Deduction on Rental Property Owned by NRI: What You Need to Know
With the increasing trend of Non-Resident Indians (NRIs) investing in Indian real estate, especially in cities like Kochi, Bangalore, and Mumbai, rental income has become a key source of revenue for many. However, taxation rules for NRIs are different from those for resident Indians — particularly when it comes to TDS (Tax Deducted at Source) on rental income.
In this blog, we’ll explain how TDS is deducted on rental property owned by an NRI, what tenants need to know, and the legal responsibilities involved.
🏠 Who is Considered an NRI for Tax Purposes?
An individual is considered an NRI under Indian tax laws if:
- They have stayed outside India for more than 182 days in a financial year, or
- They meet other conditions under Section 6 of the Income Tax Act.
💰 Is Rental Income of an NRI Taxable?
Yes. Under Indian tax laws:
- Rental income earned in India is taxable in India, even if the NRI resides abroad.
- It is considered “income from house property”, and is taxed at applicable slab rates.
- The tenant is legally required to deduct TDS before transferring rent to the NRI landlord.
📉 TDS Rate on Rent Paid to NRIs
- As per Section 195 of the Income Tax Act, if you’re paying rent to an NRI, you must deduct TDS at 30% + cess on the gross rent.
- This is not the same as 5% TDS applicable to resident landlords under Section 194-IB.
🧾 Example: If you’re paying ₹50,000 per month to an NRI landlord, you must deduct ₹15,000 as TDS (30%) and remit the balance ₹35,000.
📑 Tenant’s Responsibilities
- Obtain TAN: Tenants must have a Tax Deduction Account Number (TAN) to deduct and deposit TDS.
- Deposit TDS: Use Form 15CA and 15CB (certified by a Chartered Accountant) to remit the TDS to the government.
- Issue TDS Certificate: Provide Form 16A to the NRI as proof of deduction.
- Timely Compliance: TDS must be deposited within 7 days from the end of the month in which it is deducted.
⚠️ Failure to comply can result in penalties and interest under the Income Tax Act.
📜 Can NRIs Claim Refunds or Tax Relief?
Yes. NRIs can:
- File an income tax return in India and claim a refund if TDS exceeds their tax liability.
- Apply for a lower TDS certificate from the Assessing Officer under Section 197, especially if their total income is low.
🔍 Key Things to Remember
- Even if the tenant is an Indian resident, the TDS rule applies based on the tax residency of the landlord.
- TDS must be deducted each month before transferring the rent.
- It is always advisable to consult a tax advisor or CA for accurate filing and compliance.
✅ Conclusion
Owning a rental property in India as an NRI can be a rewarding investment, but it comes with tax obligations. Both the NRI landlord and the tenant must be aware of their responsibilities regarding TDS deduction and payment. Ensuring compliance not only avoids penalties but also builds trust between landlords and tenants.
📞 Need help with NRI property management or TDS compliance in India?
We assist with documentation, rent collection, and legal support — contact us for a free consultation!