Renting out property in India as an NRI landlord
Rent paid to a non-resident landlord falls under what is now Section 393(2) of the Income-tax Act, 2025 — previously Section 195 of the 1961 Act — and not under the provision that applies to resident landlords. The differences are substantial: deduction is at 30% plus applicable surcharge and cess rather than 2%, there is no monthly threshold so it applies from the first rupee, the tenant must obtain a TAN, deposit monthly, and file Form 27Q quarterly. Rent is normally credited to an NRO account, and repatriation has its own documentation.
Section 194-IB and Section 195 compared
Same transaction, entirely different obligations, decided only by where the landlord is resident.
| Resident landlord (194-IB) | Non-resident landlord (195) | |
|---|---|---|
| Rate | 2% of rent | 30%, plus applicable surcharge and cess |
| Threshold | Rent above ₹50,000 for a month | None. It applies from the first rupee |
| Tenant needs a TAN | No, it works on PAN | Yes |
| When to deduct | Once a year, on the last month | On each payment or credit |
| Deposit | With the Form 26QC challan-cum-statement | By the 7th of the following month |
| Return | Form 26QC | Form 27Q, quarterly |
| Certificate to the landlord | Form 16C | Form 16A |
Rates, surcharge and cess are set by the Finance Act and change. Confirm the current figures before deducting rather than relying on a table.
What the tenant has to do
Heavier than most tenants expect, which is why it is worth settling before the tenancy starts.
- Establish the landlord's residential status for tax purposes, and get it in writing. It is a question of tax residence rather than passport.
- Apply for a TAN if you do not have one. Section 195 deductions cannot be made on PAN alone.
- Deduct on every payment or credit of rent, not once a year.
- Deposit the deducted amount by the 7th of the following month.
- File Form 27Q each quarter and issue Form 16A to the landlord.
- Where rent is being remitted abroad rather than credited in India, deal with Form 15CA, and Form 15CB from a chartered accountant where the amount requires it.
Why the deduction is often larger than the tax actually due
Thirty per cent of gross rent is deducted, but an NRI landlord's actual liability is computed under Income from House Property like anyone else's: municipal taxes paid, the 30% standard deduction under Section 24(a), and interest on borrowed capital all come off before tax is calculated.
So the deduction routinely exceeds the real liability, and the difference comes back as a refund after the return is filed. That is a cash flow cost rather than a tax cost, but on a year's rent it is not a small one.
The remedy is to apply to the assessing officer for a certificate authorising deduction at a lower rate or nil rate, which the tenant then applies instead of the full 30%. It takes effort and it is worth it where the rent is substantial. An NRI landlord who has not looked at this is usually financing the government for a year at no interest.
Where the rent goes, and getting it out
Rent from Indian property is ordinarily credited to the landlord's NRO account. The NRE account is for income earned abroad; Indian rental income belongs in the NRO.
Repatriating from an NRO account is permitted within the annual limit the Reserve Bank prescribes, with the bank requiring Form 15CA and, in most cases, Form 15CB certifying that tax has been paid. The practical friction here is documentary rather than legal: the bank wants to see that the tax position is clean before it will remit.
Where the landlord is resident in a country India has a tax treaty with, the treaty may reduce the rate applicable to the income. Claiming treaty benefit requires a Tax Residency Certificate from the other country and the related declaration, and it is not automatic.
Agreements and verification still apply
Nothing about being non-resident changes the rest of it. The agreement still has to be stamped at the rate the state prescribes and registered where the term requires it, and a power of attorney given to someone in India to execute documents on your behalf usually needs to be executed and attested in the prescribed way abroad to be usable here.
Tenant police intimation, where a local order requires it, is the landlord's obligation and does not transfer to whoever manages the property unless you have said so in writing.
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NRI landlord FAQ
What is the TDS rate on rent paid to an NRI landlord?
Rent paid to a non-resident falls under Section 195 of the Income-tax Act, 1961, at 30% plus applicable surcharge and cess, with no threshold, so it applies from the first rupee. This is separate from Section 194-IB, which applies only to resident landlords at 2% above ₹50,000 a month.
Does the tenant need a TAN to rent from an NRI?
Yes. Section 195 deductions require a TAN, unlike Section 194-IB which works on PAN through Form 26QC. The tenant also deducts on each payment rather than once a year, deposits by the 7th of the following month and files Form 27Q quarterly.
Can the 30% deduction be reduced?
Yes, by applying to the assessing officer for a certificate authorising deduction at a lower or nil rate, which the tenant then applies. Because 30% is taken on gross rent while the real liability is computed after municipal taxes, the 30% standard deduction and loan interest, the amount deducted routinely exceeds the tax actually due.
Which account should rent be paid into?
Normally the landlord's NRO account. The NRE account is for income earned abroad, while rent from Indian property is Indian income and belongs in the NRO. Repatriation from the NRO is permitted within the annual limit the Reserve Bank prescribes, with Form 15CA and usually Form 15CB.
Does a tax treaty help?
It can, where the landlord is resident in a country India has a treaty with. Claiming the benefit is not automatic: it requires a Tax Residency Certificate from the other country and the related declaration, so it has to be arranged rather than assumed.
What happens if the tenant does not deduct?
The obligation sits on the tenant, so the consequences of failing to deduct or deposit fall there, including interest and penalty, and the expenditure can be disallowed where the tenant is a business. This is why establishing the landlord's residential status in writing at the start matters to the tenant more than to the landlord.
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Provisions referred to
- The Income-tax Act, 2025 — Section 393(2) (TDS on payments to non-residents), in force from 1 April 2026, replacing Section 195 of the 1961 Act
- The Income-tax Act, 1961 — Section 194-IB (resident landlords), for contrast
- The Income-tax Act, 1961 — Sections 22 to 24 (income from house property)
- Form 27Q, Form 16A, Form 15CA and Form 15CB under the Income-tax Rules, 1962
- Foreign Exchange Management Act, 1999 and the Reserve Bank's rules on NRO accounts and repatriation
This is general information about Indian tax and exchange control, not tax advice. Rates, surcharge, cess and repatriation limits change, residential status is a question of fact for each year, and treaty positions depend on the specific treaty. Confirm the current position with a qualified chartered accountant before acting.