Renting properties by NRI in India

An NRI can rent out property that he owns in India. The rent proceeds can be credited to the NRE or NRO account. Rent proceeds received in these accounts can be freely repatriated. If you do not have an NRE or NRO account, the proceeds can also be directly remitted abroad but you would need an appropriate certificate from a chartered accountant certifying that all taxes have been duly paid.  

Income earned by the NRIis in India henceliability of tax payment by the NRI arises in India. In fact, tax will be deducted at source by the payerof the rent i.e. the person to whom the property is rented by the NRI. The payer of the rent, in this case, must obtain a TAN number and deduct TDS of 30 per cent from the rent amount. He must also provide a TDS certificate to the NRI so that the deduction of TDS can be claimed.

The responsibility of deducting tax is on the payer. In case the payer does not deduct tax and the NRI too fails to declare the income and pay the tax. In such a case, the income tax authorities can hold the payer responsible.

Having said that, if the tenant does not deduct tax at source, it is prudent to file your tax returns and pay the taxes thereof.

An NRI is subjected to a resident of another country for tax purposes. And in most cases, countries levy tax on residents on their global income. So it may happen that as per provisions of the Indian Income Tax laws, tax will be deducted at source on income earned in India, as is in the case of rent. But at the same time, that income will be subject to tax in the NRI’s country of residence. In such cases, referring to the Double Taxation Avoidance Agreements is necessary that India has entered into with various countries.

The India-US DTAA for instance provides that rent from immovable property will be taxed in the country in which the property is situated. So NRIs who are residents of US would have to pay tax on rental income in India. While they would still have to declare that income while filing their tax returns in the US, they would get a credit for taxes paid in India.

According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether rented out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property based on certain valuations prescribed by the income tax rules and pay the tax thereof. Keeping the property vacant is surely not a way to minimize taxes because the deemed rental income concept doesn’t allow so.

Avail benefits, exemptions and deductions rather than keeping your properties vacant for no use!


Feel free to write to us,at [] or call us at +91 88208208 11.