Taxation on Rental Income in India for NRIs

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• Posted on August 13, 2025August 13, 2025

Are you a Non-Resident Indian (NRI) earning rental income from property in India? If yes, understanding taxation rules is crucial. The Indian Income Tax Act has special provisions for NRIs, and following them not only helps avoid penalties but also ensures maximum benefits for taxation on rental income .

Rental income is fully taxable under Indian law, and non-compliance can lead to heavy fines or even prosecution. Whether it’s about TDS deductions, DTAA benefits, or filing ITR, having a clear strategy is essential. This guide explains everything NRIs need to know about rental income taxation in India.

1. Is Rental Income Taxable for NRIs?

Yes. Rental income from property in India is taxable for NRIs, just like for resident Indians. However, NRIs have specific rules regarding TDS, account types, and ITR filing.

As per Indian tax law:

• Rental income is taxed under the Income from House Property head.
• Taxable income is calculated based on Net Annual Value (NAV).

How to Calculate Taxable Rental Income

You are taxed only on the NAV, which is derived as follows:

1. Gross Annual Value (GAV) – Total rent received/receivable in a year.
2. Less: Municipal Taxes – Deduct property taxes paid by you.
3. Result: Net Annual Value (NAV).
4. From NAV, deduct:
   
   • 30% Standard Deduction (repairs & maintenance)
   • Home Loan Interest (if applicable)

Example:

Particulars	Amount (₹)
Gross Annual Rent	6,00,000
Less: Municipal Taxes Paid	20,000
Net Annual Value (NAV)	5,80,000
Less: Standard Deduction (30%)	1,74,000
Less: Home Loan Interest	1,00,000
Taxable Rental Income	3,06,000

This taxable income is added to any other Indian income you have and taxed as per individual slab rates (no separate NRI slab).

2. TDS on Rent Paid to NRI

Under Section 195, when a resident tenant pays rent to an NRI, they must deduct TDS at 30% + surcharge + cess (~31.2%) on the total rent, irrespective of the amount.

For rent above ₹50 lakh annually, an additional surcharge applies, increasing the TDS rate slightly.

Tenant’s Compliance Steps:

1. Obtain TAN (Tax Dedication Account Number).
2. Deduct TDS @ ~31.2%.
3. File Form 15CA & Form 15CB before remitting rent.
4. Deposit TDS with the government.
5. Provide Form 16A (TDS certificate) to the NRI.

Example:

Monthly Rent	Annual Rent	TDS @ 31.2%	Payable to NRI
₹40,000	₹4,80,000	₹1,49,760	₹3,30,240

Non-dedication or incorrect deduction of TDS may result in penalties for the tenant.

3. Deductions & Exemptions Available

NRIs can claim most deductions available to residents:

1. Standard Deduction – 30% of NAV (auto-applied, no proof needed).
2. Municipal Taxes – Fully deductible if paid by the owner.
3. Home Loan Interest (Sec 24b) –
   
   • Self-occupied: up to ₹2 lakh/year
   • Let-out: No upper limit
     
4. Section 80C (up to ₹1.5 lakh) – For:
   
   • Principal loan repayment
   • Stamp duty & registration
   • Life insurance premiums

Note: NRIs are not eligible for certain deductions under Sections 80DD, 80DDB, and 80U. Even if only rental income is earned and TDS is deducted, filing ITR can help claim a refund.

4. Filing ITR in India as an NRI

NRIs must file ITR-2 if total income in India (including rent) exceeds ₹2.5 lakh. Filing is beneficial even if below the limit because you can:

• Claim a TDS refund.
• Maintain compliance for future investments/visas.
• Set off housing loan interest losses.

Declare rental income under “Income from House Property” in the ITR, and mention the tenant’s TDS in the TDS Schedule.

5. Quick Deduction Reference Table

Section	Deduction Type	Limit
24(a)	Standard Deduction	30% of NAV
24(b)	Home Loan Interest	₹2 lakh (self-occupied), No limit (let-out)
80C	Principal Repayment	Up to ₹1.5 lakh
80EE	Additional Interest (First-time buyers)	Up to ₹50,000

Municipal taxes paid during the year are also fully deductible from gross rent.

6. Section 197 – Lower or Nil TDS Certificate

If your actual tax liability is lower than 31.2%, apply for a Lower Deduction Certificate under Section 197.

Steps:

1. Submit Form 13 to the Income Tax Department.
2. Provide projected income, TDS details, and justification.
3. Once approved, the tenant deducts TDS at the reduced rate.

7. Avoiding Double Taxation on Rental Income – DTAA

If you live in a country that has a Double Taxation Avoidance Agreement (DTAA) with India (e.g., USA, UK, Canada, Australia), you can avoid paying tax twice.

Example: An NRI in the USA renting out property in Mumbai can claim Foreign Tax Credit in the USA for the 31.2% TDS paid in India.

Accurate reporting of rent income is essential to claim DTAA benefits and refunds. Filing ITR in India is mandatory for these claims.

8. Compliance Checklist

For NRI Landlords:

• Mention NRI status in lease agreements.
• Keep records of rental income.
• Collect TDS certificates (Form 16A) from tenants.
• Keep KYC documents updated.
• Check Form 26AS regularly to verify TDS credits.
• Apply for lower TDS under Section 197, if eligible.
• Ensure rent is credited to your NRO account unless the tenant is an NRI with an NRE account.

For Tenants of NRI Landlords:

• Apply for TAN via NSDL before deducting TDS.
• Deduct 31.2% TDS from the monthly rent.
• Pay TDS via Challan ITNS 281 before the 7th of the next month.
• File quarterly TDS returns (Form 26Q).
• Provide Form 16A to the landlord within 15 days of filing.
• Obtain Form 15CB from a Chartered Accountant if the annual rent exceeds ₹5 lakh, before filing Form 15CA online.

Conclusion

Taxation on rental income for NRIs may seem complicated, but with proper knowledge and planning, you can remain compliant and minimise taxes.

• Use deductions like 30% NAV, home loan interest, and DTAA benefits to offset high TDS rates.
• Maintain all records: Form 26AS, TDS certificates, lease agreements, and payment proofs.
• Apply for a lower TDS certificate if eligible.
• Always file your ITR on time.

Whether you own one property or several, staying organised ensures peace of mind and maximised returns.Rental income laws too complex? Let NRI Grow simplify it for you—be it TDS, income tax, or documentation. From tenant compliance to tax optimization, NRI Grow ensures every aspect is handled with clarity, accuracy, and peace of mind.