NRI Rental Income in India: Tax, 31% TDS and How to Cut It
If you're an NRI letting a flat in India, your tenant must deduct tax at 30% plus 4% cess, an effective 31.2%, from every rupee of rent, with no threshold. Your real tax is usually far lower, so the gap comes back only as a refund after you file a return, or never leaves your hands if you get a lower deduction certificate before the year starts.
Key takeaways
- TDS on rent paid to a non-resident now sits in section 393(2) of the Income-tax Act, 2025 (old section 195). The rate is 31.2% of gross rent, from the first rupee.
- NRIs don't get the section 156 rebate (old 87A), so rent that would be tax-free for a resident with the same income is taxed from Rs 4 lakh under the new regime.
- A lower deduction certificate on Form 128 (old Form 13) lets the tenant deduct close to your real liability. Renew it every year.
- Excess TDS comes back only through an Indian return, into a pre-validated Indian account.
- Rent is current income: after tax, it can go abroad from your NRO account without touching the USD 1 million yearly cap, using Forms 145 and 146 (old 15CA and 15CB).
How your rent is taxed, and why TDS overshoots
The computation is the one a resident landlord uses: annual value, less municipal tax, less the flat 30% under section 22, less loan interest. Our guide to tax on rental income in India walks through it. What changes for you is everything around that number.
Your tenant deducts on the gross rent, before the 30% deduction or any interest, at the top-slab rate plus cess (surcharge applies only at high incomes). Two NRI rules widen the gap further:
- No rebate. A resident with taxable income up to Rs 12 lakh pays nothing under the new regime, thanks to section 156. An NRI pays slab tax on everything above Rs 4 lakh.
- No Form 15G or 15H. NRIs can't file these to stop TDS; the only route is a certificate from the Assessing Officer.
The exemption limit is Rs 4 lakh under the new regime and Rs 2.5 lakh under the old one, whatever your age; the higher senior-citizen limits are for residents only.
| Point | Resident landlord | NRI landlord |
|---|---|---|
| TDS section (2025 Act) | 393(1), old 194-I / 194-IB | 393(2), old 195 |
| When TDS starts | Only above a rent threshold | From the first rupee |
| TDS rate on rent | A low rate | 30% plus cess, 31.2% |
| Rebate up to Rs 12 lakh (new regime) | Yes, section 156 | No |
| Form 15G / 15H to stop TDS | Yes, if eligible | No |
| Route to lower TDS | Rarely needed | Form 128 certificate, yearly |
| Where rent is received | Any resident account | NRO account |
A worked example: Rs 75,000 a month
You live in Singapore and let your flat in Pune at Rs 75,000 a month. You pay Rs 20,000 a year in property tax, have no loan on it and no other Indian income. You file under the new regime.
| Line | Amount |
|---|---|
| Annual rent (Rs 75,000 x 12) | Rs 9,00,000 |
| TDS deducted by tenant at 31.2% (Rs 23,400 a month) | Rs 2,80,800 |
| Less property tax paid | Rs 20,000 |
| Net annual value | Rs 8,80,000 |
| Less 30% standard deduction | Rs 2,64,000 |
| Taxable income from house property | Rs 6,16,000 |
| Tax: 5% on Rs 2,16,000 above Rs 4 lakh | Rs 10,800 |
| Plus 4% cess | Rs 432 |
| Actual tax due | Rs 11,232 |
| Refund due on filing | Rs 2,69,568 |
A resident with the same income would pay nothing after the rebate. You owe Rs 11,232, about 1.25% of the gross rent, but the tenant has taken 31.2%, and Rs 2,69,568 of it is yours.
Now the timing. The return for an April-March tax year is due by 31 July after it ends, and refunds arrive 15 to 60 days after you e-verify, depending on the source. TDS taken from April's rent may come back around September of the following year, some 17 months later. Refund interest (0.5% a month under the old section 244A, nil if the refund is under 10% of the tax determined) won't make up for that.
The lower deduction certificate, step by step
This is the one piece of paperwork that changes your cash flow. Under section 395(1), you apply on Form 128 for a certificate telling the tenant to deduct at a lower rate, or nil.
What you file
- Form 128, filed online through TRACES and signed with a digital signature certificate.
- Your PAN, and the tenant's TAN (each tenant is a separate deductor).
- An estimate of your income and tax for the year, with the rent agreement behind it.
- Your last three or four returns.
With several tenants, the system can issue a master certificate plus a child certificate for each.
How long it takes, and how long it lasts
The officer is meant to decide within about 30 days; practitioners report 30 to 45. The certificate runs from issue to 31 March and covers only the deductor it names, so apply in early April, every April. TDS taken before it arrives stays at 31.2% and joins your refund claim.
In the example, a certificate near your real liability would let the tenant deduct around 1.25% instead of 31.2%. The officer sets the rate, perhaps a little above your estimate, but most of the Rs 2,69,568 stays in your NRO account.
The tenant's side
Your tenant needs a TAN, files the quarterly Form 144 (old 27Q) and gives you a Form 131 certificate (old 16A). From 1 October 2026, resident buyers of NRI property can pay by PAN-based challan without a TAN; whether that covers tenants was still being examined when we checked, so tenants should keep their TAN. Tell a prospective tenant up front, and put the TDS duty in a registered rent agreement.
Filing the return and getting the refund
Most NRI landlords file ITR-2. File even when your income is under the exemption limit, because there is no other way to recover TDS. For 2025-26, the ITR-2 deadline was 31 July 2026.
- Match the TDS first. Every rupee deducted should show in your AIS against your PAN. A tenant who deducted but didn't file Form 144 is the usual reason a refund stalls.
- Pre-validate an Indian account. Refunds go only to a pre-validated Indian account, normally your NRO account, with name and PAN matching the bank's records.
- Choose the regime. The new regime is the default. With a loan on the flat, compare both.
- E-verify. Processing starts only after verification.
Getting the rent out of India
Rent is received in your NRO account. As current income, it can go abroad after tax without using the USD 1 million a year allowed for capital such as sale proceeds. The bank will want:
- Form 145 (old 15CA), your declaration for the remittance, filed online.
- Form 146 (old 15CB), a chartered accountant's certificate, needed with Part C of Form 145 once remittances cross Rs 5 lakh in the year.
Form 145 now asks for your foreign tax identification number, so keep it handy.
Credit for Indian tax where you live
India's tax treaties give India, where the flat sits, the first right to tax the rent, usually under Article 6. Your country of residence then exempts it or gives a credit for the Indian tax, but only for tax you legally owed, not the raw TDS. In the example, a US resident could claim credit for about Rs 11,232, not Rs 2,80,800, and must recover the rest from India through the return. Your home tax year may not match India's, so keep the monthly TDS figures and Form 131 certificates.
When letting from abroad is a poor fit
- Small rents. On a Rs 20,000 flat, CA fees for a certificate and a return eat a real share of the refund.
- Tenants who won't deal with TDS. Families often balk at a TAN and quarterly filings; companies usually handle it, which is why NRIs like corporate leases.
- Tenant defaults. If the tenant deducts but doesn't deposit, you can't claim the credit, and chasing them from abroad is slow.
If the net yield after the TDS drag looks thin, compare it with the rental yield in your city, or read our guide to NRI property investment in India. Moving abroad soon? See what changes in our checklist for becoming an NRI.
Frequently asked questions
Can my tenant deduct TDS on the net rent after the 30% deduction?
No. Without a lower deduction certificate, the tenant must deduct 31.2% of the gross rent paid to you, with no threshold. The 30% deduction and any loan interest are applied only in your own return, when your final tax is worked out. The one way to get a lower rate at source is a Form 128 certificate naming that tenant.
Do I have to file a return in India if TDS has already been deducted?
You aren't always obliged to if tax deducted covers your liability, but you almost always should. The deduction is usually far more than your real tax, and the only way to recover the excess is by filing, normally ITR-2. The return also gives you a clean record when you remit the rent abroad through your NRO account.
How early should I apply for a lower TDS certificate?
Apply in the first week of April. Officers are meant to decide in about 30 days but often take 30 to 45, and the certificate only covers rent paid after it is issued, until 31 March. Anything deducted before it arrives stays at 31.2% and has to be claimed back as a refund through your return.
Can the rent go straight into my NRE account?
Rent is Indian income, so it goes into your NRO account, the account designed for income earned in India. From there you can remit it abroad after tax as current income, with Form 145 and, above Rs 5 lakh in a year, a chartered accountant's Form 146. That remittance doesn't count against the USD 1 million yearly limit.
I live in the UAE. Does the tax treaty reduce my Indian tax on rent?
Not for rent from a flat in India. The treaty lets India tax income from Indian property in full, and with no UAE personal income tax there is no credit to claim either. Your savings come from India's own rules: the exemption limit, the 30% deduction, a lower deduction certificate and a refund through your return.
If you're letting a flat in India from abroad and want a second pair of eyes on the tenant, the lease or the numbers, the Realty Hunting team is glad to help.
