Rental Income from Indian Property for NRIs: Deductions, TDS and Filing

Many NRIs rent out a flat in India. The rent is taxable in India whatever your residential status, because the property is in India. The good news is that the deductions are generous. The catch is that your tenant must deduct TDS, which most tenants do not know.

How rental income is taxed

Rent is taxed under “Income from house property”:

Step	Amount
Gross annual rent received or receivable	₹ A
Less: municipal taxes actually paid by you	(B)
Net Annual Value (NAV)	A – B
Less: standard deduction of 30% of NAV (for repairs and maintenance, whatever you actually spend)	(30% × NAV)
Less: interest on a home loan for this property	(C)
Taxable income from house property

This taxable amount is added to your other Indian income and taxed at slab rates.

Example: monthly rent of ₹40,000 gives ₹4,80,000 a year. Property tax paid is ₹20,000, so NAV is ₹4,60,000. The 30% deduction is ₹1,38,000. Home loan interest is ₹1,50,000. Taxable rent = ₹1,72,000.

Home loan interest: old vs new regime

For a let-out property: interest is deductible in full under both regimes when working out the rental income.
Old regime: if the interest creates a loss, up to ₹2 lakh of it can be set off against other income in the year. The rest is carried forward for up to 8 years.
New regime: a house property loss cannot be set off against other income.
Principal repayment can be claimed under section 80C only in the old regime.

TDS: the tenant’s obligation

When the landlord is an NRI, the tenant must deduct TDS under section 393(2) of the Income-tax Act, 2025 (old section 195):

Rate: 30% + surcharge + 4% cess (about 31.2%) on the rent paid. There is no threshold, so the ₹50,000-a-month limit for resident landlords does not apply.
Who deducts: every tenant, individuals as well as companies.
How: tenants have traditionally needed a TAN and to file quarterly TDS returns (now Form 144, formerly 27Q), and to give you a TDS certificate (now Form 131, formerly 16A).

What if the tenant does not deduct? The tenant can face interest and penalties and be treated as “in default”. In practice many landlords end up paying the tax themselves through their ITR.

Reducing TDS on rent

Because 31.2% of the gross rent is usually much more than the actual tax after the 30% deduction and interest:

Apply for a lower TDS certificate (Form 128, section 395), naming the tenant as the payer.
Treaty rate: rent from property is generally taxable in India in full under treaties, so the DTAA does not usually reduce TDS on rent.
File your ITR to claim back any extra TDS.

Practical tips

Rent goes into your NRO account, not your NRE account.
Keep a rent agreement, property tax receipts and your home loan interest certificate.
Give your PAN to the tenant. Without it, TDS can be even higher.
If the property is jointly owned, each owner reports their share of the rent and claims their share of deductions.
Repatriating rent: within the USD 1 million NRO limit, with Forms 145/146.

Frequently asked questions

Is rent from India taxable if I live in a country with no income tax, like the UAE?
Yes. Rent from Indian property is taxable in India whatever the tax position in your country of residence.

My tenant is a salaried individual. Must they still deduct 31.2%?
Yes. For an NRI landlord, every tenant must deduct TDS from the first rupee.

Can I claim the 30% deduction even if I spent nothing on repairs?
Yes. The 30% standard deduction is a flat allowance, whatever you actually spent.

Do I need to file an ITR if TDS was deducted?
You should, because it usually gets you a refund. You must file if your total Indian income is more than the basic exemption limit.

Renting out your flat in India? Garvita Jain & Co. helps NRI landlords with lower TDS certificates, tenant TDS compliance, repatriation and returns. Contact us here, or at contact@garvitajainandco.com or +91 98678 16597.

This article is general information based on the law as of October 2026 and is not professional advice.

Sources

Official

Professional / CA publications