Wednesday, April 23, 2014

An NRIs Guide to Rental Income in India

Yesterday one of my colleagues here was talking to me about his house in India. As he is working in Singapore, he has actually rented out his apartment and is earning an income each month. He was not aware as to whether he needs to pay taxes on that income in India or was he exempt because he is an NRI. I was able to alleviate his fears and guide him on the appropriate steps but it struck me that many of us have friends & relatives who are NRIs and are in the same situation as my friend.

So, this article will help clarify this tricky subject...

Who is an NRI?

NRI Stands for Non Resident Indian. Any Indian Citizen who is employed in a foreign country is considered an NRI.

Does India Have Double Taxation?

India does not implement Double Taxation. So, if your income is taxed in the country where you are employed, you need not pay taxes on that in India again.

Can NRIs earn rental income?

Absolutely Yes. However, the rent proceeds have to be credited only into an NRE or NRO account. If you do not have an NRE or an NRO Account, the Rent can also be directly remitted abroad (to the country where you are living). But, if you want to proceed with this remittance route - you would need an appropriate certificate from a chartered accountant certifying that all taxes have been duly paid.

Is this Rental Income Taxable in India?

Yes. Since this income is earned in India, tax will be payable by the NRI in India.

How Should this Tax be Paid?

Tax has to be deducted at source by the payer of the rent. The payer of the rent, 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. The NRI will use this TDS Certificate and file his tax returns to obtain the requisite refund. For ex: If your rent per month is Rs. 20,000/- the Tenant should pay Rs. 6,000/- as Taxes each month and pay only Rs. 14,000/- as rent to you. You will then get the TDS Certificate from your Tenant and then file the Tax Returns to get the refund.

If you are living in a house that is owned by an NRI, you are liable to pay fines if you are not deducting TDS. The Tax Authorities will consider you the "RENT Payer" responsible for deducting TDS at 30% and remitting the same to the Tax Department. Though the property belongs to the NRI and he has to pay taxes, the tax officials expect you to take the initiative.

Alternately - If you are an NRI and your Tenant is not deducting TDS, it is your responsibility to file your tax returns and pay the taxes due from your side. At the end of the day you are the owner of the property and you are liable to pay fines for tax evasion.

Is rental income taxed in the country of residence?

It Depends..

As an NRI, you are a resident of another country and hence you will come under that countries jurisdiction when it comes to tax matters. In most cases, countries levy tax on residents on their global income. Even if you are paying taxes on your Indian Rental Income (Or any other income for that matter) the same could be taxed in your country as well. In such cases, we need to refer to the Double Taxation Avoidance Agreements that India has entered into with various countries.

For Ex: Between India and USA We have a DTAA Agreement. According to it - 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.

So, it is best if you check the tax laws of the country where you are a resident or consult a tax expert in that country to avoid tax evasion issues there.

How Much Tax Am I Liable to Pay?

You need to add the "Rental Income" to any other income you may have in India like - Capital gains from sale of stock market instruments, interest on deposits etc. The total income would be considered as taxable income and you need to pay taxes based on which slab you fall under.

If your total income in India is lower than the minimum threshold (2.5 lakhs) you are not liable to pay any taxes however it is best if you at least file your TAX Returns to be on the safe side. Remember - Your tenant will be deducting TDS on the rent he pays you. So, even if the rent is lesser than the minimum tax threshold, you will still need to file your tax returns in order to get the TDS Refund.

As NRI's we dont get benefits like Section 80C or other tax saving options. So, whatever we earn in India beyond the minimum threshold is fully taxable.

Hope this answered your basic queries reg. Rental Income for NRI's. If you have any further queries - do leave a comment and I will try my best to answer the Query...


  1. thanks for your guides.I'm NRI I have 2 doubts.

    1) i have some house property. I have that in lease basis. Like 2 Lakh for 2 years. After 2 years once they vacate i'll return. In that case how to calculate the % of tax?

    2) I have deposit in my NRI Account even though if the interest go more than 2.5Lakh per annum i need to pay tax?

    Thanks in advance for you more clear my doubts.

    1. Lax - Interest Income on your NRE Account is exempt from taxes but if you have any other income in India - like income from shares, you need to pay taxes on the same.

      Leased income which is returned is not treated at the same level as rental income. It is better you consult a good chartered accountant in India and get his advise.

  2. Very good article

    I have some Question, I am NRI , I have two Flats out of them one flat is on Rent for 11500 monthly and it is deposited directly in My NRO account ,Did i need to Pay tax? , As it come under 2 lacs tax exemption limitation from government of India.--- Vijay

    1. No, you need not pay any taxes but you have to file your tax returns. Ideally your tenant should deduct TDS and remit it to the tax authorities and at the end of the year, you must file your taxes and claim a refund.

    2. Thanks you very much Anandji for your reply and very good suggestion, for current financial year i already told my tenant to cut TDS accordingly now onwards, now Question is, I am going to file IT returns for last financial year (which end on 31 March 2014) as my tenant does not deduct TDS still i can file IT Returns, as I not done a proper way as per law by Government of India.or any other complication while filing IT returned due to this issue
      Once again thanks for usefully suggestion, much appreciated

    3. It should be ok Vijay. Just file your taxes and show the proper rental amount in your tax returns. It would be good if you enlist the help of a chartered accountant/tax filing service. They may charge a few hundred rupees but it will be a lot easier for you.

  3. I am NRI working abroad since 2007 (Normally I am away from India around 220 day every year) , Also I have NRE and NRO account since 2007, Usually transaction from abroad is done in NRE account, Now my Question is
    1) I have joint Saving account with my wife since 2004 in other bank , my wife is resistant in India (she is not NRI), most of transaction in this account is carried out on my wife name so it that ok to continue this joint saving account with my wife. or i need to declare something in IT department or I need to close my name in joint saving account.I like to mention here there is fixed deposit on wife name in that bank with saving account.
    2) legally can i make joint account holder to my wife in NRE account even if she is not NRI.

    1. See answers below:

      1. Whoever gets the rent (whose account money gets deposited) has to show the rental income in their tax returns. And yes, the account into which the rent is received has to be declared while filing the returns.

      2. No, legally an NRI cannot have a joint account with a resident indian. Similarly, your wife who is a resident indian cannot be a joint holder in your nre account.

      You need to close that account and make it individually operated by your wife. Then you can ask the rent to be deposited into your wife's bank account. Once done, your wife has to show the rent as her income.

      Alternately, you can ask the rent to be deposited into your nre account and you can file tax returns on your name.

  4. I've recently moved to Singapore and have vacated the rented house in Bangalore. My owner was NRI (based in the US) and had opened a TDS account for TAX deduction. Who is responsible for closing the TDS account for Tax deduction?

    1. As you are the one who used to deduct the TDS and remit the same, the primary responsibility would be on you. Better to start the process to avoid any issues in future.

  5. Thanks Anand

    You mention rent should be deposited in NRE or NRO account
    Not sure but how one can deposit indian currency in NRE account.
    I believe in NRE account you can deposit foreign currency or funds can be transfered from another NRE account
    Please explain

    1. Yes, but an NRO Account allows indian rupee deposits. Quoting the article text again here: Absolutely Yes. However, the rent proceeds have to be credited only into an NRE or NRO account.

  6. Who signs the rental agreement duly printed on stamp paper? CAn the NRI do it himself by making the tenant send the agreement to him or the duly registered POA can sign on their behalf.

    1. Either way should be fine. The person with the POA can legally do everything the person who gave the power can do.

  7. Hi Anand,

    I am a NRI and I own a house in India which is rented out. My mom currently get the rental income from that house. Can my mom pay the tax on rental income or should I still pay it. please let me know.

  8. Hi Anand,
    Your article was very informative. It will be helpful if you can answer few of my questions
    1. I am a nri and I recently rented my apartment in India. My tenant deposited the initial security deposit amount to my nro account which I will eventually return to the tenant when they vacate. Should I pay any tax on this security deposit amount ?

    1. As it is a refundable deposit - I dont think so.

  9. Hi Anand,

    Thank you for your blog.

    Can you please answer my queries below.

    I am going to USA in Sep for higher studies for 2 years. I do have income from my salary and some interest income from my savings accoount/FDs this FY. Will I be considered an NRI ( Since I will be in USA more than 180 days this FY and all 365 days next FY) ? I am confused since in your definition you mentioned that some one who is employed abroad is considered a NRI.

    I will rent my Indian flat out while I am in US.So do I have to follow the NRI taxation laws or just resident taxation law ?


    1. Jeevan,
      I used the term employed abroad because students mostly dont have any income in India. Ideally, any Indian who lives abroad (studying/working etc) would be considered an NRI and in your case, when you rent your flat, you will fall under NRI rules.

  10. Hello Anand ji,

    This is very useful blog.

    I am an NRI since 2005. I bought 5 Apartments and one House in India over a period of time from year 2005 to year 2010. I am receiving rents and some times they are vacant. As I don't know, I never filed and Tax Returns in India.

    I have few questions:

    (1) Will I be able to file my tax returns in India since 2005 or is there any year that I need to start filing as late returns?

    (2) Is there any way I need to show that I received rent from each Apartment / house separately in the Tax Returns in India?

    (3)I want to sell one of the Apartment that I bought in India in year 2006 (I bought that Apartment for 20 Lacs. Now the Apartment may be sold for about 40 Lacs. Will there be any issues as I did not filed tax returns so far?

    (4) is there any Income tax I need to pay when I sell the Apartment on profit of Rs 20 Lacs? How the Tax department will know that I sold my Apartment that I bought earlier?

    (5) If the apartment I am selling is given by my parents, is there any issues as it will be sold at Rs.40 Lacs?

    (6) Another thing is one of my relative is receiving the rents to his account in India and transferring the rents amount from his account to my NRO account. Is there is any issue with this?

    1. 1. Backddated tax filing is a tricky subject and hence i would recommend you consult a good chartered accountant or tax filing service for the same

      2. yes, each house rent has to be shown separately

      3. yes, there could be potential issues due to non payment of taxes.

      4. capital gains is payable on house sale proceeds based on certain criteria. You can find more info about the capital gains for house sales in my book on indian income tax. let me know if you want to buy it by emailing me at

      5. most likely yes.

      6. Yes, you should be receiving it directly. now, your relative could be questioned by tax officials for getting rent for a house owned by someone else

  11. Hi,
    My sister is an nri and we stay in her a house which is registered on her name. We plan to rent it out with her consent. She has given me her power of attorney to rent (and not sale).
    Is this legal?

    1. with power of attorney yes its possible. as long as proper taxes are being paid its legal

  12. Very useful article & comments.
    I need a small help.

    I am working in Malaysia for past 4 yrs (so am a NRI). My wife stays with me but is not working for past 4 yrs (since we moved to Malaysia).
    Now we have a flat in India which is registered on both our name as co-owners.
    Can the rent agreement be registered under her name only & rent is deposited into her SAVINGS BANK ACC ? Is she treated as resident indian ?

    Many Thanks

    1. Can rent be credited to her account and she be the name in the rental agreement? - Yes, as she is also a joint owner of the house

      Is she treated as a resident indian? No, she lives with you in malaysia, how can she be a resident indian?

    2. Thanks.
      One more Query - is TDS only in the case if lease is with a company or even individual need to pay TDS ? Eg. if i rent my flat to a family. Does the tenant need to pay TDS ?
      Many Thanks

    3. Its applicable to everyone who is paying rent Even if its an individual (family member or otherwise) they have to deduct the TDS and pay to the IT Department.


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