Taxation of NRI Rental Income in India
Non-Resident Indians owning residential or commercial property in Kerala or elsewhere in India are liable to pay income tax on rental yields under the Income Tax Act, 1961. This practical guide breaks down Section 195 TDS requirements, available deductions, and how to avoid double taxation.
Disclaimer: This content is for general informational purposes only and does not constitute personalized legal or financial advice. For specific tax filings or audits, consult our qualified accountants directly.
1. How Rental Income is Taxed for NRIs
Rental income received from property situated in India is treated as income accruing or arising in India, regardless of whether the rent is deposited into an NRO bank account in India or directly remitted to an overseas account.
Gross Annual Rent Received
Less: Municipal / Property Taxes Paid during the year
= Net Annual Value (NAV)
Less: 30% Standard Deduction under Section 24(a)
Less: Home Loan Interest Paid under Section 24(b)
= Taxable Rental Income
2. TDS Requirement Under Section 195 (31.2%)
Tenants paying rent to an NRI landlord are legally mandated under Section 195 to deduct TDS at **31.2%** (30% tax + surcharge/cess) before remitting rent. The tenant must obtain a TAN (Tax Deduction and Collection Account Number) and deposit the TDS monthly using Form 281.
**Common Problem:** If your total taxable Indian income is below the basic exemption limit (₹2,50,000 / ₹3,00,000), 31.2% TDS is excessive. You can claim a full refund by filing ITR-2 or obtain a Lower TDS Certificate (Form 13).
Have Questions About Your NRI Rental Tax?
Acharya assists NRIs with TAN registration for tenants, Section 195 lower deduction certificates, and yearly ITR filing.
Contact NRI Tax Specialist