NRIs can buy property in India The property can be residential or commercial. NRIs are allowed to take a loan in India and buy property as well.
NRIs usually buy a house for investment or for the purpose of self-occupancy when they are in India. In many cases, a person would have bought a house as a resident and his status would have changed to NRI later on.
As an NRI, what can you do to this property? You can either keep it locked and use it when you are in town or rent it out to earn some income.
Read – India Tax for NRI on Indian Income
NRIs Rent Their House & Tax on Rental Income
Let us look at the implications of renting out your house when you become an NRI –
Receipt of NRI Rental Income
An NRI is allowed to receive a rental income. It can be received in the NRO account. It can be received in the NRE account if the rent is being paid from an NRE account.
Both NRI and tenant should have PAN. The tenant should also have a TAN (Tax Deduction Account Number). The tenant should also submit form 15CA and/or 15CB as per certain conditions of the payment.
Tax On Rental Income In India for NRIs
The tenant can get TAN online via the NSDL website. Once the tenant obtains TAN, the tenant has to deduct TDS, pay it online and pay the balance to the NRI as rent. TDS on house rent payment has to be deducted at 31.2%.
The NRI can claim the following deductions –
- Standard deduction of 30% on taxable rent
- Deduction of Property Taxes paid
- Deduction for principal repayment under Section 80C. Stamp duty and registration charges can also be included here
- Deduction for interest payment for a home loan for the purchase of the property.
Post these deductions, the rent will be added to the overall income and taxed as per the tax slab applicable to him/ her.
Read – All About TDS for NRI
Taxability of Rental Income In Country of Residence
Many countries have Heavy tax on residents on their global income. So as an NRI, you will be paying NRI rent tax in India as well as in your country of residence for rent received in India. We generally do not like paying tax and I am sure most of us will dislike paying it twice.
To avoid double taxation, India has signed a treaty called the Double Tax Avoidance Agreement (DTAA) with many countries. Individuals can use the provisions of this agreement to avoid double taxation.
Rental Yield
Rental yield means what percentage of rent is paid in comparison to the value of the property. For Example, if a property is valued at Rs 1 Crore & rent is Rs 2 Lakh – rental yield is 2%. (2/100)
NRI Pays huge rent outside India so they think let’s earn some in India but unfortunately, rental yields in India are very low 1.5% to 2.5%. (In developed countries like the US & Australia it’s 5-6%)
NRI Property Management
Managing property is a big headache for everyone – for NRIs it’s nightmare. Finding the right tenants, legal issues & maintenance of the property sitting outside India is not easy. You may be surprised that there are companies that are providing NRI property management as Service.
Check – Tax Rates for NRIs on Indian Income and Investments
NRI Rental Income
Two Examples To Make The Concept Clear
1) Ajay lives in Singapore. He has a house in Mumbai that is rented out. He earns a rent of Rs. 25,000 per month. He earned Rs. 12,500 in the financial year as interest income. How much tax does he have to pay?
Here is a working of his tax liability –
| Particulars | Amount (₹) |
| Total Annual Rent Payable | ₹ 3,00,000 |
| TDS Payable | ₹ 93,600 |
| Net Rent Paid to Ajay | ₹ 3,00,000 – ₹ 93,600 = ₹ 2,06,400 |
| Total Income for the financial year for Ajay | ₹ 2,06,400+ ₹ 12,500 = ₹ 2,18,900 |
| Taxability in India | NIL
If total income in a financial year is less than Rs. 2,50,000, the tax liability is zero. |
| Taxability in Singapore | No tax will be payable for this income in Singapore** |
2) Nandini lives in the US. She had purchased a property in India using a home loan. She pays interest on the home loan. She has rented out the apartment to her friend. The annual rent is less than the annual home loan interest payment. What is Nandini’s tax liability?
Nandini can consider the difference between the interest and rent received as ‘loss’. It can be set off against other income heads in the tax return and tax can be paid accordingly. If that is not possible in the current financial year, the loss can be carried forward up to 8 years to set off against any income received.
She does not have to pay tax on the rental income in the US though she has to declare it. She will get credit for any tax paid in India.
The tenant and the NRI are responsible to pay the requisite tax else either or both can be penalized for tax evasion. You have to understand the taxation rules thoroughly before filing your income tax returns.
**Note – Consult a CA for Tax Issues
Should NRIs Rent Their House?
It is always nice to earn some extra money in the form of rent. It is even better to think that your investment in the house is working for you and not lying idle. Moreover, if the tenant is a considerate person, the house will be maintained well. It will be in a usable state.
But there are many factors to consider while renting it out. If you are abroad, there will be no one around your property to manage or supervise it. Moreover, there will be costs involved in maintenance and repairs. You will have to deal with your tenant and that requires time and effort based on how considerate the tenants are. When you are back in India for a vacation, you will have to look for alternate accommodation as you will not be able to live in your house.
Alternatively, there are big tax implications for selling the house as there would be capital gains. You will have to use time and effort to manage ways to avoid the tax.
“Look at the pros and cons of renting/selling your house in India and decide on the basis of what suits you the best.” wiseNRI
Please share your views regarding NRI renting a property in India & tax on rental income in India.
My Q is regarding leaseing a property.How is the tax calculated , if i lease my property for 35 Lakhs for 3 years
What is tax liability for the rental income in India , I am in USA currently
Hi Nitesh,
As per my knowledge, Rental income earned by an NRI is considered as income accruing or arising in India and is taxable in India therefore the income is subject to tax.
Rental income need to file tax or not ..amount is less than 5 lakh inr
Hello Shambhu
Yes, rental income earned by an NRI (Non-Resident Indian) in India is taxable and needs to be filed with the Income Tax Department, irrespective of the amount earned. However, there are certain rules and regulations that need to be followed while filing taxes for rental income earned in India by an NRI.
If I rent my flat in India Will I have to pay tax in India
Hi Karan,
If you have a Certificate of Exemption: The tax on rental income can be exempted if the NRI property owner has a certificate that states that his total income from India is below the exemption limit
I am an NRI starting to rent the apartment from september. So in 1 year I will be earning 2,64,000 Lakh as income in India. I have no other income. How do I pay tax. Can Inget refund of it
Hi Dilip,
If you have a Certificate of Exemption: The tax on rental income can be exempted if the NRI property owner has a certificate that states that his total income from India is below the exemption limit
I’m an NRI, can i received the house rent in India via my savings account?
Hi, Surek
No.
We have a rental property in India and previously the income was below Rs 250,000. However, over the last few years, it went over the limit and we didn’t know we need to pay taxes so need to figure out how to pay back taxes in India. Can you provide more details? Also how many years do we need to go back to?
Hi Jai,
As per my Knowledge, You need to Consult with a CA for Tax Filing for this year and previous years.
I am expecting my insurance maturity to be credited to my Saving account. Now if i change the status of my account from Saving to NRO, does it affect the status?
Hi Avadhut,
No, it will not affect the status. Because the account number will remain same as Saving Account.
I am a NRI. I have a house with 2 floors and my parents live in the ground floor. The first floor is rented out. In this case, is only tax applicable on the 1st floor rent or rent needs to be calculated for the ground floor as though it is rented out (like notional rent) to a third party and the amount used for income tax calculation purposes ? I don’t receive any actual rent for the ground floor where my parents live.
Hi Sam,
I think the rent will be calculated only on the portion which you have rented.
I have rented my house to union Bank of India Ghazipur. The trace account is incorrect. It is taking out more TDS (10%) becaue they show income more than my contract. How can I get them to correct it. When corrected, my income will be less than 5000,00 Rs, which is below the tax slab form me. > 80 yrs. My wife is 79.
Hi Shambhu Ji
You can contact Union Bank and tell them to draft the new agreement as per the rent you are receiving. If they are not doing so then you can take help from a tax or legal consultant.
An Indian resident had taken a life insurance policy but latter on became NRI.The policy was assigned to Indian Resident (mother) of NRI.Please clarify tax implication on NRI/Indian Resident.Whether Insurance co. is to notified about life assured when maturity proceeds are paid.Thanks
Hi Virendra,
As per my knowledge, there will be no tax implications.
Kindly consult your Tax & Insurance advisor for more authentic answer.
Just planning to invest in Real Estate. Wanted to know if the total rental received in India is below 2.5 lakhs annually, there is not tax for an NRI, am I right? In such situation does the Tenant have to deduct TDS while paying the rent? Is Building Mantainence charges considered as part of the rental or rental is minus the maintenance charges?
Hi Reji
The tenant need to deduct the TDS for the NRI, there is no threshold limit for that.
If the total income in a Financial Year exceeds Rs 2.5 Lakh then you are required to pay taxes.
Generally building and maintenance charges are not a part of rental.
Dear Abhinay,
Thanks. So for all rentals, irrespective of the amount paid as rental, the tenant has to pay TDS. Am I right?
As explained in the article TDS make tax filing simple, the article shows there are provisions for different kinds of deductions that can be claimed while filing returns. TDS doesn’t mean money is lost forever, in fact the money is just sitting in ITD’s account and in some cases they even pay a small interest.
Very good information. Can you pl. Share the information if some one has more than one property (e.g. I have 6 flats and getting rent on only 1 4000 Rs.) How rest will be calculated. Deemed rent.
Hi Manoj,
As per the changes in the Income Tax recently, now 2 properties will be considered as Self Occupied & as per the Fair rent prevailing in the area where the rest of the properties are, they will be taxed as considering deemed rental income.