What is TDS on NRI rental income?
TDS stands for Tax Deducted at Source. Under Section 195 of the Income Tax Act, 1961, any person making a payment to a Non-Resident Indian must deduct tax before releasing the money. This applies to rent payments — your tenant is the deductor, and you (the NRI owner) are the recipient.
The applicable TDS rate for NRI rental income is:
On a ₹50,000/month property, this means ₹15,600 is deducted every month — ₹1,87,200 per year — before the money even reaches your account.
Who is responsible for deducting TDS?
Your tenant is legally responsible for deducting TDS and depositing it with the government. This applies regardless of whether the tenant is an individual, company, or firm.
Many tenants — particularly individual professionals — are unaware of this obligation. If they don't deduct TDS, the liability shifts to them. However, as the NRI owner, you may still face complications during ITR filing if TDS is not properly deducted and deposited.
When Verta manages your property, we ensure your tenant is correctly briefed on their Section 195 obligations — and we hold the relevant documentation.
Can TDS be reduced? Yes — with a Lower Deduction Certificate
This is the most important thing to understand: 31.2% TDS is the default rate, not the mandatory rate. Under Section 197 of the Income Tax Act, you can apply for a Lower Deduction Certificate (LDC) — also called a lower withholding certificate — from the Income Tax Department.
An LDC instructs your tenant to deduct TDS at a much lower rate — typically 0% to 5% — instead of 31.2%. The certificate is property-specific and tenant-specific, valid for one financial year.
The real-world impact of an LDC
Property: 3BHK in Gachibowli renting at ₹60,000/month
How to apply for a Lower Deduction Certificate
The LDC application is made using Form 13, filed online through the TRACES portal (traces.gov.in). Here is the process:
File Form 13 on TRACES
Log in to TRACES with your PAN. Navigate to 'Certificates' → 'Form 13 for Lower/Nil TDS'. Enter property details, rental income, and estimated tax liability.
Submit supporting documents
Upload your PAN card, Aadhaar (or passport for NRIs), the lease agreement, bank statements showing rental income, and your previous year's ITR if filed.
Officer review
Your application is reviewed by your jurisdictional Assessing Officer. They may call for additional documents or a hearing. Timeline: typically 15–30 days.
Certificate issued
The LDC is issued with a specific rate (e.g., 2% or 5%) valid for the current financial year. Share this certificate with your tenant.
Tenant deducts at lower rate
Your tenant now deducts at the LDC rate instead of 31.2%. The difference stays in your account.
What is Form 15CA and Form 15CB?
Every time your tenant remits money internationally to your overseas account, they must file:
- Form 15CB — A certificate from a Chartered Accountant certifying that the TDS has been properly deducted and that the remittance is in compliance with FEMA and income tax rules.
- Form 15CA — An online declaration filed on the Income Tax portal by the remitter, based on the CA's Form 15CB certificate.
These forms must be completed for every international transfer. Verta coordinates this documentation for all managed properties — your tenant's obligations are clearly laid out in the lease agreement, and we ensure compliance at every remittance.
TDS and your ITR filing
As an NRI with Indian rental income, you are required to file an Income Tax Return (ITR) in India. The TDS deducted by your tenant appears in your Form 26AS (viewable on the IT Department portal). During ITR filing:
- If your tax liability (after deductions) is less than TDS deducted, you receive a refund.
- If your tax liability is higher, you pay the difference.
- With an LDC reducing TDS to 5%, most NRI landlords in lower income brackets either owe nothing extra or receive a small refund.
Common mistakes NRI landlords make
Not informing tenants about Section 195 obligations — resulting in the tenant not deducting TDS and creating compliance problems.
Failing to apply for an LDC, leaving 25–30% of rental income on the table unnecessarily.
Not ensuring Form 15CA/15CB is filed before every international transfer — banks can refuse transfers without these.
Mixing NRE and NRO accounts — rent can only be deposited in NRO; NRE is for foreign earnings.
Not filing ITR in India — NRI rental income above the basic exemption limit is taxable and must be declared.
Verta handles TDS compliance for all managed properties
We apply for LDC, coordinate Form 15CA/15CB for every remittance, and brief your tenant on their Section 195 obligations at lease signing. This is standard for every Verta client.
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