NRI Rental Income in India: TDS on Rent Paid to an NRI Under Section 393, What the Tenant Must Do, and How the NRI Gets the Excess Back

If your landlord lives abroad, the rent you pay is a payment to a non-resident, and Indian tax law treats it very differently from rent paid to a landlord in the same city. There is no monthly threshold, the deduction is 31.2% instead of 2%, and the tenant needs a tax deduction account number (TAN) and a quarterly statement. Most tenants and many NRI landlords find this out late, usually when the landlord tries to sell, file a return or move money out of India. This guide sets out what the law asks of the tenant, what the NRI actually owes on the rent, and how the large gap between the two is closed.

Written on 25 October 2026 from the text of the Income-tax Act, 2025 (sections 21, 22, 156, 393, 395, 397, 398, 402 and 427) on the Income Tax Department's site, Part II of the First Schedule to the Finance Bill, 2026 (passed as the Finance Act, 2026), and the department's old-to-new form mapping. The examples use round, assumed figures for the tax year 2026-27. This explains the law and the arithmetic; it is not advice on any particular tenancy.

TDS on rent paid to an NRI: the short answer

When you pay rent to a landlord who is a non-resident, you deduct tax under section 393(2) of the Income-tax Act, 2025, the provision that replaced section 195 of the 1961 Act from 1 April 2026. Rent falls in serial number 17 of the table in that section: "any other sum chargeable" to tax and paid to a non-resident who is not a company. The rate is "rates in force", which means the rate in Part II of the First Schedule to the year's Finance Act. For a non-resident Indian, that schedule taxes "the whole of the other income" at 30%. Add the 4% health and education cess and the deduction is 31.2% of the rent.

The "company or large-business tenant" in the table is a "specified person" as defined in section 402(37): anyone other than an individual or HUF, and an individual or HUF whose business turnover was above ₹1 crore, or professional receipts above ₹50 lakh, in the previous year. An ordinary salaried tenant is not a specified person.

Surcharge matters only for large rents. Under the same Part II, if the rent paid or likely to be paid to that landlord in the year is above ₹50 lakh, the tax is increased by 10%, which takes the rate to 34.32%; above ₹1 crore by 15% (35.88%), and higher above ₹2 crore. For a family flat, the rate is 31.2%.

Why the tenant cannot apply the ₹50,000 limit

The ₹50,000-a-month threshold and the 2% rate are written into the rent entry of section 393(1), and that section deals with payments to residents. Rent to a non-resident is not in it. It falls under section 393(2), which has its own table, and serial number 17 of that table has no threshold column at all. A tenant paying ₹15,000 a month to an NRI owner is as much a deductor as a company paying ₹5 lakh.

The same logic decides who must deduct. Serial number 17 says the deductor is "any person". It does not matter that the tenant is a salaried individual, a student or a family; if the payee is a non-resident, the duty applies. Residence is the landlord's residential status for tax, worked out by days in India, not citizenship or the passport. A landlord who is an Indian citizen working in London and in India for under 120 days in the year is a non-resident; our residential status guide sets out the tests.

The tenant's checklist, step by step

A practical point on step 3: section 393(2) speaks of the sum "chargeable" to tax, and a tenant could argue that only the rent less the landlord's deductions is chargeable. The tenant cannot see those deductions or the landlord's other income, and a tenant who deducts on less than the full rent carries the risk of proving the smaller figure later. The safe course, and the one most deductors follow, is to deduct on the full rent unless a certificate under section 395 says otherwise.

If the lease says the tenant will bear the tax, so that the landlord receives the full rent untouched, the tax paid on the landlord's behalf is itself part of the rent, and the deduction has to be grossed up: section 393(10). On a net ₹40,000 that means rent of about ₹58,140 and tax of about ₹18,140 a month. Most leases avoid this by stating that the rent is before TDS, so that the tenant deducts from it.

What happens if the tenant does not deduct

Section 398 makes a person who fails to deduct, or deducts and does not pay, an "assessee in default" for that tax. On top of that, simple interest runs at 1% a month from the date the tax should have been deducted to the date it is deducted, and 1.5% a month from deduction to payment. A late Form 144 costs a fee of ₹200 a day under section 427, capped at the tax deducted. There is some relief in section 398(2): if the landlord has filed a return including the rent and paid the tax on it, and an accountant certifies this, the tenant is not treated as in default for the tax itself, though interest still runs up to the date of the landlord's return.

The usual way this surfaces is not a notice to the tenant. It is the NRI landlord who finds no TDS credit against the rent when filing, or a buyer's lawyer who asks for the rent records when the flat is sold. If you have been paying an NRI landlord without deducting, it is cheaper to start now, deposit the arrears with interest, and file the statements, than to wait for the question.

What the NRI actually owes on the rent

The 31.2% is a withholding rate, not the landlord's tax. The NRI's tax is worked out like anyone else's under the head "Income from house property":

• Annual value (section 21): the higher of the rent the flat could reasonably fetch and the rent actually received, reduced by municipal taxes the owner actually paid in the year.
• 30% standard deduction (section 22(1)(a)) on that annual value, for repairs and upkeep, whatever was actually spent.
• Interest on a home loan (section 22(1)(b)) taken to buy, build or repair the flat. The ₹2 lakh cap in section 22(2) is for houses the owner lives in or treats as self-occupied; it does not limit interest on a let-out flat. Interest on a loan from abroad is allowed only if tax was deducted on it or there is an agent in India (section 22(6)).
• Slab rates on what is left, together with any other Indian income such as NRO interest. Income earned abroad is not taxed in India for a non-resident.

One difference from a resident costs NRIs money. The rebate in section 156, which makes income up to ₹12 lakh tax-free for a resident under the new regime, is given only to "an individual resident in India". An NRI pays slab tax on every rupee above ₹4 lakh. The new-regime slabs are nil up to ₹4 lakh, 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh and 30% above, plus 4% cess.

Worked examples: TDS deducted against the NRI's real tax

Assumptions: the flat is let for the whole tax year 2026-27, the owner pays the municipal tax shown, the NRI has no other Indian income, and the new regime applies (it is the default).

At ₹75,000 a month, the tax on ₹6,16,000 is 5% of the ₹2,16,000 above ₹4 lakh, which is ₹10,800, plus ₹432 cess. The tenant has deducted 25 times that. If the same NRI also pays ₹3,00,000 a year of interest on the loan used to buy the flat, the taxable rent falls to ₹3,16,000 and the tax to nil, so the whole ₹2,80,800 is excess.

The NRI may choose the old regime instead in the return. It has a lower nil band (₹2.5 lakh for a non-resident of any age) and the same 30% deduction and loan interest on a let-out flat, so for an NRI whose only Indian income is rent the new regime usually comes out lower. Where the interest exceeds the rent after the 30% deduction there is a loss, and the rules on setting it off differ between the two regimes; work that case out with a CA.

Two legal ways to stop the over-deduction

1. The landlord's lower-deduction certificate: Form 128

Under section 395(1), the payee, here the NRI, can apply to the Assessing Officer for a certificate to deduct tax at a lower rate or not at all, on the ground that the total income justifies it. The application is Form 128 (it replaced Form 13 from 1 April 2026), filed online on the TRACES portal with an estimate of the year's Indian income and tax. Once the certificate is issued, section 395(1)(c) obliges the tenant to deduct at the rate it states for as long as it is valid. Certificates are issued for a tax year, so apply early in April, and give the tenant a copy before the first rent of the year.

This is the cleaner route for a landlord whose rent is the main Indian income: on the ₹40,000 example the correct deduction is nil, and a certificate stops ₹1,49,760 a year from being locked up until the refund. Our guide to Form 128 for NRIs selling property covers the same application in more detail.

2. The tenant's application for the chargeable part: section 395(2)

Section 395(2) gives the person paying a non-resident a separate route: if the payer considers that the whole sum would not be chargeable in the recipient's hands, the payer can ask the Assessing Officer to determine the proportion that is. Tax is then deducted only on that proportion. The application form is Form 129, which replaced Form 15E. In practice it is the NRI who has the figures, so the Form 128 route is far more common, but a company tenant paying a large rent may prefer to have its own order.

Getting the excess back: the return and the refund

Without a certificate, the NRI gets the extra tax back only by filing an income tax return for the year. Rent from a house property and NRI status mean ITR-2 for most (ITR-1 is not available to non-residents). The steps that decide whether the refund arrives:

• Check that every quarter's TDS shows in Form 168, the annual information statement (the old Form 26AS), against your PAN. If a quarter is missing, the tenant has not filed Form 144 or has quoted the wrong PAN, and only the tenant can correct it.
• File by the due date, 31 July for most individuals. Section 437 pays interest on refunds at 0.5% a month, and a late return earns less of it.
• Pre-validate an Indian bank account for the refund on the e-filing portal. An NRO account works; the refund cannot go to a foreign account.
• Report the gross rent, not the rent net of TDS, and claim the TDS in the tax-paid schedule.

Moving the rent out of India

Rent is Indian income, so it is usually received in the landlord's NRO account. Sending it abroad from there is a remittance: the bank asks for Form 145 (the old 15CA), and above ₹5 lakh, a CA's Form 146 (the old 15CB), and remittances from NRO balances are limited to USD 1 million a financial year. If the tenant pays rent straight to a foreign account, the tenant is the remitter and these forms fall on the tenant before the money goes. The paperwork is explained in our note on Forms 145 and 146.

Does the tax treaty lower the rate on rent?

Usually not. India's tax treaties follow the standard model for income from immovable property: rent from a flat in India may be taxed in India, where the property is (Article 6 in most treaties). The treaty does not cap the rate on rent the way it does for interest or dividends, so a tax residency certificate and Form 41 (the old Form 10F) do not reduce TDS on rent. They matter for NRO interest.

The treaty helps in the other direction. If your country of residence taxes worldwide income, as the US, the UK, Canada and Australia do, you report the Indian rent there and claim credit for the Indian tax under the treaty and that country's own rules. Claim the credit on the tax finally due in India, the ₹11,232 in the ₹75,000 example, and not on the ₹2,80,800 deducted, because the excess comes back to you as a refund. In the UAE, where there is no personal income tax, the Indian tax is the only tax on the rent.

Common situations

The NRI landlord's year, in order

Frequently Asked Questions

What is the TDS rate on rent paid to an NRI? 31.2%: tax at 30% under the rates in force for non-resident Indians, plus 4% cess. Surcharge is added only if the rent paid to that landlord in the year is above ₹50 lakh.

Is there a minimum rent below which no TDS is deducted for an NRI landlord? No. The ₹50,000-a-month threshold applies to rent paid to residents under section 393(1). Rent to a non-resident falls under section 393(2), which has no threshold.

Under which section is TDS deducted on rent paid to an NRI? Section 393(2) of the Income-tax Act, 2025, table serial number 17, from 1 April 2026. Before that it was section 195 of the 1961 Act.

Does a salaried tenant need a TAN to pay rent to an NRI? Yes. The TAN exemption in section 397(1)(c) covers rent paid to residents and the purchase of property from an NRI by a resident individual, not rent paid to an NRI.

Which form does the tenant file for TDS on rent paid to an NRI? Form 144, the quarterly statement for payments to non-residents that replaced Form 27Q, and Form 131 (the old 16A) as the certificate to the landlord.

How can an NRI reduce TDS on rental income? By applying for a lower or nil deduction certificate in Form 128 under section 395(1), with an estimate of the year's income. The tenant must then deduct at the rate in the certificate.

How does an NRI get back excess TDS on rent? By filing an income tax return, usually ITR-2, by the due date. The refund is paid to a validated Indian bank account, with interest at 0.5% a month under section 437.

Do NRIs get the ₹12 lakh tax-free limit on rental income? No. The rebate in section 156 is only for residents. An NRI pays tax on income above ₹4 lakh under the new regime.

Can the tenant deduct TDS only on the taxable part of the rent? Only with an order. Section 395(2) lets the payer apply in Form 129 for the chargeable proportion to be determined; without that, or the landlord's certificate, deduct on the full rent.

What happens if a tenant does not deduct TDS on rent paid to an NRI? The tenant can be treated as an assessee in default for the tax, with interest at 1% a month until it is deducted and 1.5% a month until it is paid, and a fee of ₹200 a day for a late Form 144.

Is rent from India taxed again in the US or UK? It is reported there, and credit is given for the Indian tax under the treaty and local rules. Claim the credit on the final Indian tax, not on the TDS that is refunded to you.

Sources

The rules and figures in this article can be checked against these official sources.

• Income-tax Act, 2025, section 393: tax to be deducted at source Income Tax Department
• Finance Bill, 2026 (Bill No. 3 of 2026, passed as the Finance Act, 2026 on 30 March 2026): First Schedule, Part II, rates for deduction of tax at source, including 30% on the other income of a non-resident Indian, and the surcharge on tax deducted Gazette of India
• Income-tax Act, 2025, section 397: compliance and reporting by a deductor Income Tax Department
• Income-tax Act, 2025, section 395: certificates, including for lower or nil deduction Income Tax Department
• Income-tax Act, 2025, section 398: consequences of failure to deduct or pay tax at source, and interest Income Tax Department
• Income-tax Act, 2025, section 427: fee of ₹200 a day for a late TDS or TCS statement Income Tax Department
• Income-tax Act, 2025, section 402: definitions for tax deducted at source, including “specified person” Income Tax Department
• Income-tax Act, 2025, section 21: annual value of a house property Income Tax Department
• Income-tax Act, 2025, section 22: deductions from income from house property, including interest on a home loan Income Tax Department
• Income-tax Act, 2025, section 156: rebate of income-tax Income Tax Department
• Income-tax Act, 2025, section 202: the new tax regime Income Tax Department
• Income-tax Act, 2025, section 437: interest on refunds, 0.5% a month Income Tax Department
• Income-tax Act, 2025, section 159: double taxation agreements Income Tax Department
• Income-tax Rules, 2026 Income Tax Department
• Old and new section, rule and form numbers: the department’s mapping utility Income Tax Department
• TRACES: TDS statements, certificates and corrections Income Tax Department
• e-Filing portal: returns, refund status, AIS and Form 168 Income Tax Department