TDS on Rental Income for NRIs Explained

If your tenant isn't deducting TDS correctly on your rent, it's your problem come tax time, not theirs. Here's exactly how it's supposed to work.

See the TDS Rate
Quick Facts
  • Tenants renting from an NRI landlord must deduct TDS at 30% (plus surcharge/cess) — far higher than the 2% rate for resident landlords.
  • The tenant needs a TAN (not just a PAN) to deduct and deposit this TDS correctly.
  • Over-deducted TDS is refundable, but only after you file an Indian tax return.

Overview

When a property is rented out to a tenant in India, and the landlord is an NRI, the tenant is legally required to deduct tax at source from the rent before paying it — at a materially higher rate than if the landlord were a resident. Many tenants (and even some property managers) get this wrong, which can create compliance headaches for the NRI landlord later.

TDS Rate on Rent Paid to NRIs

Landlord typeTDS rate on rentDeducted under
Resident landlord2%Section 194-IB (for individual tenants above a threshold)
NRI landlord30% (plus applicable surcharge and cess)Section 195
Unlike the resident-landlord rate, there's no minimum rent threshold for Section 195 to apply — TDS on rent to an NRI landlord applies regardless of the monthly amount.

Tenant's Compliance Obligations

What the Tenant Must Do
  • Obtain a TAN (Tax Deduction Account Number) — a PAN alone isn't sufficient for this kind of deduction.
  • Deduct TDS from each rent payment at the applicable rate.
  • Deposit the deducted amount with the Income Tax Department and file quarterly TDS returns (Form 27Q).
  • Issue a TDS certificate (Form 16A) to the NRI landlord.
Why This Matters to You as Landlord
  • If the tenant fails to deduct/deposit TDS correctly, it can complicate your own tax filing and refund claims.
  • Confirm your tenant has a TAN and understands their obligation before finalizing the lease.
  • Keep copies of Form 16A certificates — you'll need them to substantiate TDS credit when filing your return.

Lower TDS Certificate for Rental Income

If 30% TDS meaningfully overstates your actual tax liability on the rent — common if your total Indian income is modest, or after accounting for deductions like a home loan interest offset — you can apply to the Assessing Officer for a Lower TDS Certificate under Section 197, similar in concept to the Form 13 certificate used for property sale TDS. Once approved, your tenant deducts at the certified lower rate instead of the default 30%.

Reporting Rental Income & Claiming Refunds

  • Report the gross rental income (before TDS) in your Indian tax return, along with any eligible deductions (standard deduction, home loan interest, municipal taxes paid).
  • Claim credit for the TDS already deducted using your Form 16A certificates.
  • If TDS deducted exceeds your actual tax liability, the excess is refundable once your return is processed.

For the full income tax filing process, see our Tax Filing for NRIs guide.

Frequently Asked Questions

Because it's deducted under a different section of the Income Tax Act (Section 195 for NRIs, vs Section 194-IB for residents), which applies a higher default rate to account for the difficulty of collecting tax later from someone outside India.

No. If you're an NRI landlord, the tenant must deduct at the Section 195 rate (30% plus surcharge/cess) and needs a TAN to do it correctly, not the 2% resident-landlord rate. Confirm this with them before the lease starts.

File your Indian income tax return reporting the rental income and claim credit for the TDS via your Form 16A certificates — any excess is refunded after processing. A Lower TDS Certificate (Section 197) avoids over-deduction in the first place.
Disclaimer: This guide is informational. Processes, fees, and rules can change. Always verify with the official portals before applying.
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