“Synopsis”
Many Non-Resident Indians (NRIs) own property in India and earn income through rentals. But how is this rental income taxed? Are there special rules for NRIs, and can they repatriate this money abroad? This blog breaks down NRI rental income taxation in India, TDS obligations, ITR requirements, and how to send rental income overseas legally.
Is Rental Income from Indian Property Taxable for NRIs?
Yes. Rental income earned by NRIs from properties in India is fully taxable in India under the Income Tax Act, 1961. The income is treated as “Income from House Property” and taxed accordingly.
How Is Tax Calculated on Rental Income for NRIs?
The rental income is added to your total income and taxed as per Indian slab rates, after allowing the following deductions:
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Standard Deduction (Section 24): 30% of annual rental income
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Interest on Home Loan (Section 24(b)): Deduction up to ₹2 lakh per year
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Municipal taxes paid: Allowed as deduction if paid by the owner
TDS Deducted by the Tenant
Tenants renting property from an NRI must deduct TDS at 30% (plus applicable cess) on the rent paid.
Important points:
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The tenant is responsible for TDS compliance, not the NRI.
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The tenant must deposit the TDS with the Income Tax Department using Form 26QB.
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TDS Certificate (Form 16A) must be provided to the NRI.
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PAN of both tenant and landlord (NRI) is required.
Do NRIs Have to File ITR for Rental Income?
Yes, NRIs must file Income Tax Return (ITR-2) if:
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Total income in India exceeds ₹2.5 lakh
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TDS has been deducted but refund is due
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Want to claim deductions under Section 24
Filing is necessary even if income is below ₹2.5 lakh but TDS was deducted — to claim refund or avoid notices.
Can NRIs Repatriate Rental Income Abroad?
Yes, under FEMA guidelines, NRIs can repatriate rental income to their foreign bank accounts.
Conditions:
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The property must be owned legally and compliant with FEMA
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The amount must be earned in INR and routed through NRO account
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Tax on the rental income must be paid
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Up to USD 1 million per financial year can be repatriated (along with other eligible assets)
Steps to Repatriate Rental Income:
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Deposit rent in NRO account
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Pay applicable taxes and file ITR
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Submit Form 15CA and 15CB (if amount exceeds ₹5 lakh)
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Request bank to repatriate funds
Tax Tips for NRIs Earning Rental Income in India
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Ensure tenant is deducting TDS and filing it correctly
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File ITR every year to claim deductions and refunds
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Maintain property documents and rent agreements
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Open and operate a proper NRO bank account
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Hire a Chartered Accountant to assist with tax compliance
Can an NRI Claim Double Taxation Relief on Rental Income?
Yes. If you’re paying tax on the same income in your country of residence, and India has a Double Taxation Avoidance Agreement (DTAA) with that country, you can claim relief.
You’ll need:
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Tax paid certificate from India (Form 16A)
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Proof of income in the foreign country
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DTAA provisions applicable to that country
Common Mistakes NRIs Make
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Assuming rental income is tax-free
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Not informing tenant about TDS rules
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Failing to file ITR in India
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Using NRE account instead of NRO for rental transactions
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Not planning repatriation within FEMA limits
Conclusion
Rental income from Indian property is a great way for NRIs to earn passive income, but it comes with tax responsibilities. From TDS compliance to repatriation documentation, everything must be done by the book. By understanding the NRI rental income taxation rules and planning ahead, you can maximize your earnings and stay compliant.
