NRI & Foreign Buyers
NRI Rental Income and Tax in India
Your tenant has a legal obligation they almost certainly do not know about — and if they get it wrong, the tax department comes after them.
The short answer
Rent paid to an NRI attracts TDS under SECTION 195 — at a much higher rate than the rent paid to a resident landlord.
The TENANT must deduct it, obtain a TAN, and file quarterly.
Most tenants have no idea. And if they get it wrong, the liability is theirs — which is a very unpleasant surprise for a tenant, and a problem for the landlord who never told them.
The TDS your tenant must deduct
When rent is paid to a non-resident, Section 195 applies. The tenant must:
1. Obtain a TAN (a PAN is not enough).
2. Deduct TDS at the applicable rate — substantially higher than the rate on rent to a resident.
3. Deposit it with the government.
4. File a quarterly return (Form 27Q, renumbered Form 144 under the Income-tax Act 2025).
5. Issue you Form 16A.
There is no small-amount threshold as generous as the resident one.
And if the tenant fails to deduct: the tax department pursues the TENANT, with interest and penalty. Not you.
Resident landlord vs NRI landlord
| Resident landlord | NRI landlord | |
|---|---|---|
| Section | 194-I / 194-IB | 195 |
| Rate | Modest, and only above a threshold | Substantially higher — the applicable rate plus surcharge and cess |
| Tenant needs a TAN? | Usually not, for an individual tenant | YES |
| Tenant files | Simple | Form 27Q / Form 144, quarterly |
| Liability if wrong | The tenant's | The tenant's |
This asymmetry is why some tenants, once advised, quietly prefer a resident landlord's flat — exactly as some buyers prefer a resident seller's. It is a real, and rarely discussed, disadvantage of being an NRI landlord.
Tell your tenant. Before they move in.
Your tenant signs the lease not knowing you are an NRI. They pay you rent in full for two years.
Then their CA, doing their return, asks who they've been paying rent to. And they discover they owe two years of un-deducted TDS, plus interest, plus penalty — personally.
They will be furious, and they will be right to be.
So:
• Tell them, in the lease, that you are a non-resident.
• Tell them their TDS obligation exists, in writing.
• Offer to have your CA explain it to theirs.
• Consider a Lower Deduction Certificate here too — Section 197 works for rental TDS, not just for sales. It reduces the deduction to what is actually due, and it makes you a far easier landlord to rent from.
A tenant who knows, and whose CA is comfortable, will stay. A tenant who finds out later will leave, and may not pay the last month.
Your Indian tax on the rent
Rental income from Indian property is taxable in India, under the head Income from House Property, regardless of where you live.
- Gross annual rent
- Less: municipal taxes actually PAID during the year (keep the receipts)
- = Net Annual Value
- Less: 30% standard deduction — automatic, no receipts needed
- Less: interest on a home loan — for a let-out property, the full interest is deductible, with no ₹2 lakh cap
- = Taxable income, taxed at your slab rate
Under the OLD regime: if the interest exceeds the rent, the resulting loss from house property can be set off against your other Indian income, up to ₹2 lakh, with the balance carried forward 8 years.
Under the NEW regime — the default — that loss cannot be set off against any other head at all, in the current year or any future year.
For an NRI with a large loan on a let-out flat, that is a material difference. Compute both regimes.
And you will generally need to file an Indian income tax return — to claim credit for the TDS your tenant deducted, and to get a refund if too much was withheld.
Double taxation — check the treaty
India has Double Taxation Avoidance Agreements (DTAA) with most countries where NRIs live.
Which generally means: tax paid in India on your rental income can be credited against your tax liability in your country of residence. You are not taxed twice on the same money.
To claim it you will usually need:
• A Tax Residency Certificate (TRC) from your country of residence
• Form 10F
• Proof of the tax paid in India — Form 16A and your Indian return
The treaty terms vary by country. Get advice from someone who understands both tax systems — not just one. A CA in India who does not know your home country's rules, or an accountant at home who does not know India's, will each get half of it right.
FEMA rules, tax rates and repatriation limits are amended by Budget, by RBI Master Direction, and by circular — sometimes more than once a year.
We have written this against the position as we understand it, and checked it. But we are not chartered accountants or lawyers, and this is not advice.
Before an NRI property transaction, engage a CA who does NRI work. On a transaction of this size, in a regime with a three-times penalty for getting it wrong, it is the cheapest insurance available.
Frequently asked questions
Does a tenant have to deduct TDS on rent paid to an NRI?
Yes — under Section 195, at a substantially higher rate than for a resident landlord. The tenant must obtain a TAN, deduct the TDS, deposit it, file a quarterly return (Form 27Q, now renumbered Form 144), and issue you Form 16A. Most tenants have no idea, and if they get it wrong the tax department pursues THEM, with interest and penalty.
Should I tell my tenant I'm an NRI?
Yes, in the lease and in writing. If they find out two years later from their CA, they will discover they personally owe two years of un-deducted TDS plus interest and penalty — and they will be furious, and right to be. Tell them up front, offer to have your CA explain it to theirs, and consider a Lower Deduction Certificate to reduce the deduction to what is actually due.
Is NRI rental income taxable in India?
Yes, under 'income from house property', regardless of where you live. You get a 30% standard deduction, may deduct the municipal taxes you actually paid, and — for a let-out property — may deduct the full home loan interest with no Rs 2 lakh cap. What remains is taxed at your slab rate.
Does the new tax regime affect NRI rental income?
Materially. Under the old regime, if your interest exceeds the rent, the resulting loss from house property can be set off against other Indian income up to Rs 2 lakh, with the balance carried forward eight years. Under the new regime — the default — that loss cannot be set off against any other head at all. For an NRI with a large loan on a let-out flat, compute both.
Will I be taxed twice on Indian rental income?
Generally not. India has Double Taxation Avoidance Agreements with most countries where NRIs live, so tax paid in India can usually be credited against your liability at home. You will need a Tax Residency Certificate, Form 10F, and proof of the Indian tax paid. Get advice from someone who understands both tax systems — one who knows only India, or only your home country, will each get half of it right.