Tax on Rental Income for NRIs in India (TDS + Filing Explained)

Last Tuesday, an NRI in Dubai forwarded us an email from his tenant's CA. The email said: "We're required to deduct 30% TDS on your monthly rent starting next month. Please provide your PAN and Form 15CA/15CB details."

He was panicking.

"Ankur, my rent is ₹45,000/month. They're going to deduct ₹13,500 every month as tax? That's ₹1.62 lakh annually! My rental income after society charges is barely ₹5 lakh. Am I really supposed to pay 30% tax on rent? Is there any way to reduce this?"

We see this panic every month at Belong.

NRIs receive rental income from India property, and suddenly they're hit with confusing TDS notices, tax forms, and calculations that don't make sense.

Your tenant tells you they must deduct 30% TDS. Your property manager mentions Form 15CA. Your CA talks about standard deduction and municipal taxes. Nothing connects.

Meanwhile, you're sitting in Dubai, London, or New York, watching 30% of your rent disappear before it reaches your account.

You have no idea if this is correct, if you can reduce it, or if you'll ever get that money back.

Here's what we've learned helping hundreds of NRIs at Belong: rental income taxation isn't as brutal as it first appears. Yes, TDS is 30%. But your actual tax liability is usually much lower.

The difference comes back as a refund when you file ITR correctly.

This guide walks through everything about tax on rental income for NRIs.

We'll cover TDS rules, how rental income is calculated, deductions you can claim, actual tax rates, refund process, and how our team at Belong ensures you never overpay.

How rental income works for NRIs: The basics

Before we dive into TDS and tax, let's understand the foundation.

What counts as rental income

Any rent you receive from property you own in India is taxable.

This includes:

Monthly rent from residential flat or house. Rent from commercial property (office, shop). Parking space rent if charged separately. Maintenance charges (if they exceed actual costs).

Example:

You own a 3BHK in Pune. Tenant pays ₹50,000/month base rent plus ₹5,000 maintenance.

If your actual society charges are ₹5,000, only the ₹50,000 is rental income.

If society charges are ₹3,000 but you collect ₹5,000, the extra ₹2,000 is also rental income.

Which account should rental income go into?

NRO (Non-Resident Ordinary) account.

Rental income is India-sourced income. RBI mandates it must be credited to NRO account, not NRE account.

Common mistake we see: NRIs asking tenants to pay rent into NRE account. This violates FEMA regulations.

Fix: Open NRO account specifically for receiving rent and other India-sourced income.

Understand NRE vs NRO account differences.

NRE vs NRO for property income.

👉 Tip: Keep rental income completely separate from your foreign earnings. NRO for India income, NRE for foreign income. This makes tax filing infinitely simpler.

TDS on rental income: What tenants must deduct

Let's break down the TDS rules causing all the panic.

When is TDS required?

TDS must be deducted if monthly rent exceeds ₹50,000.

Monthly rent ₹50,000 or less: No TDS required.

Monthly rent above ₹50,000: Tenant must deduct 30% TDS.

Example 1: Monthly rent ₹45,000. No TDS. Full ₹45,000 credited to your account.

Example 2: Monthly rent ₹55,000. TDS required. Tenant deducts ₹16,500 (30%). You receive ₹38,500.

TDS rate for NRIs: 30% (plus cess)

Effective TDS rate: 31.2% (30% base + 4% Health and Education Cess).

Example:

Monthly rent: ₹60,000. Annual rent: ₹7.2 lakh.

TDS at 31.2%: ₹2.25 lakh deducted annually.

You receive: ₹4.95 lakh.

Important: TDS is not your final tax. It's advance tax. You claim refund if actual tax is lower.

Who deducts TDS: Tenant or you?

Tenant's responsibility.

If your tenant is an individual paying rent above ₹50,000/month, they must:

• Deduct TDS before paying you

• Deposit it with the government

• Provide you Form 16C (TDS certificate)

If tenant doesn't deduct TDS:

They face penalties and interest. You're still liable for the tax. You report the income and pay tax when filing ITR.

What if tenant is a company?

Companies follow different TDS sections (Section 194I). Same 30% rate applies for NRIs.

How to check if TDS was deducted correctly

Download Form 26AS from income tax portal.

This shows all TDS deducted against your PAN:

• Who deducted it (tenant's name/PAN)

• How much was deducted

• Quarter-wise breakup

Match this against rent received.

If tenant says they deducted ₹2 lakh TDS but Form 26AS shows ₹1.5 lakh, something's wrong.

We help clients reconcile TDS mismatches regularly. Sometimes tenants deduct TDS but forget to deposit it with the government.

How rental income tax is calculated: Not as simple as 30%

Here's where most NRIs get confused. TDS is 30%, but actual tax is calculated differently.

Step 1: Calculate gross annual rent

Add up total rent received for the financial year (April to March).

Example:

Monthly rent: ₹55,000. Annual rent: ₹6.6 lakh.

Step 2: Deduct municipal taxes paid

If you paid municipal taxes (property tax), subtract it from gross rent.

Example:

Gross rent: ₹6.6 lakh. Municipal tax paid: ₹15,000. Net rent: ₹6.45 lakh.

Important: Only municipal taxes you paid are deductible. Society maintenance charges are not deductible.

Step 3: Apply 30% standard deduction

You get a flat 30% standard deduction on net rent (after municipal taxes).

Example:

Net rent: ₹6.45 lakh. Standard deduction (30%): ₹1.94 lakh. Taxable rental income: ₹4.51 lakh.

This 30% standard deduction is meant to cover:

Repairs and maintenance. Wear and tear. Property management costs.

You don't need to prove actual expenses. It's a flat 30% allowed to all property owners.

Step 4: Calculate actual tax at slab rate

Your taxable rental income (₹4.51 lakh in example) is added to other India income and taxed at slab rates.

Assuming new tax regime and no other India income:

₹0 to ₹3 lakh: Nil. ₹3 lakh to ₹4.51 lakh: 5% on ₹1.51 lakh = ₹7,550.

Plus cess (4%): ₹302.

Actual tax: ₹7,852.

Compare to TDS deducted: ₹2.06 lakh (31.2% of ₹6.6 lakh).

Refund due: ₹2.06 lakh - ₹7,852 = ₹1.98 lakh.

👉 Tip: This is why filing ITR is critical. Without filing, you lose ₹1.98 lakh permanently. We've helped NRIs recover ₹1.5-3 lakh in excess rental TDS by filing correctly.

Learn who needs to file ITR as NRI.

Real rental income tax examples

Let's walk through complete scenarios.

Example 1: Low rental income, high TDS refund

Your situation:

2BHK flat in Bangalore. Monthly rent: ₹52,000. Annual rent: ₹6.24 lakh. Municipal tax paid: ₹12,000. No other India income.

TDS deducted by tenant: 31.2% of ₹6.24 lakh = ₹1.95 lakh.

Actual tax calculation:

Gross rent: ₹6.24 lakh. Less municipal tax: ₹12,000. Net: ₹6.12 lakh. Less 30% standard deduction: ₹1.84 lakh. Taxable rental income: ₹4.28 lakh.

Tax (new regime):

₹0-₹3 lakh: Nil. ₹3 lakh-₹4.28 lakh: 5% on ₹1.28 lakh = ₹6,400. Plus cess: ₹256. Total tax: ₹6,656.

Refund: ₹1.95 lakh - ₹6,656 = ₹1.88 lakh.

Effective tax rate: 1.07% of gross rent (not 31.2%).

Example 2: Higher income, old regime with home loan

Your situation:

3BHK in Mumbai. Monthly rent: ₹80,000. Annual rent: ₹9.6 lakh. Municipal tax paid: ₹25,000. Home loan interest paid: ₹2.8 lakh/year. No other India income.

TDS deducted: 31.2% of ₹9.6 lakh = ₹3 lakh.

Actual tax calculation (old regime):

Gross rent: ₹9.6 lakh. Less municipal tax: ₹25,000. Net: ₹9.35 lakh. Less 30% standard deduction: ₹2.81 lakh. Taxable rental income: ₹6.54 lakh.

Less Section 24(b) home loan interest deduction: ₹2 lakh (maximum allowed).

Net taxable income: ₹4.54 lakh.

Tax (old regime):

₹0-₹2.5 lakh: Nil. ₹2.5 lakh-₹4.54 lakh: 5% on ₹2.04 lakh = ₹10,200. Plus cess: ₹408. Total tax: ₹10,608.

Refund: ₹3 lakh - ₹10,608 = ₹2.89 lakh.

Key insight: Home loan interest deduction (Section 24(b)) saved an additional ₹40,000 in tax by choosing old regime.

We've helped dozens of NRIs with home loans optimize rental tax by choosing old regime instead of new regime.

Compare old vs new tax regime.

Example 3: Multiple properties

Your situation:

Property 1 (Pune): Rent ₹48,000/month = ₹5.76 lakh/year. Property 2 (Delhi): Rent ₹65,000/month = ₹7.8 lakh/year. Total rental income: ₹13.56 lakh. Municipal taxes (both): ₹40,000. No other India income.

TDS deducted:

Property 1: No TDS (rent below ₹50,000/month). Property 2: 31.2% of ₹7.8 lakh = ₹2.43 lakh.

Actual tax calculation:

Total gross rent: ₹13.56 lakh. Less municipal taxes: ₹40,000. Net: ₹13.16 lakh. Less 30% standard deduction: ₹3.95 lakh. Taxable rental income: ₹9.21 lakh.

Tax (new regime):

₹0-₹3 lakh: Nil. ₹3-₹7 lakh: 5% on ₹4 lakh = ₹20,000. ₹7-₹9.21 lakh: 10% on ₹2.21 lakh = ₹22,100. Total: ₹42,100. Plus cess: ₹1,684. Final tax: ₹43,784.

But TDS deducted was only ₹2.43 lakh (from Property 2). You need to pay additional ₹43,784 - ₹2.43 lakh = shortfall needs to be paid.

Wait, that's not right. Let me recalculate:

TDS deducted: ₹2.43 lakh. Actual tax: ₹43,784. Refund: ₹2.43 lakh - ₹43,784 = ₹1.99 lakh.

Key learning: Even with ₹13.56 lakh rental income, effective tax is only ₹43,784 (3.2% of gross rent, not 31.2%).

Deductions you can claim on rental income

Let's detail exactly what reduces your taxable rental income.

1. Municipal taxes (property tax)

What it is: Annual property tax paid to local municipal corporation.

How much: Whatever you actually paid during the financial year.

Proof required: Receipt from municipal corporation.

Example:

You paid ₹18,000 property tax in September 2025. Deduct full ₹18,000 from gross rent.

Common mistake: Assuming society maintenance is deductible. It's not. Only municipal property tax.

2. Standard deduction (30%)

What it is: Flat 30% deduction on net rent (after municipal tax).

No proof required. Automatic deduction.

Example:

Gross rent: ₹6 lakh. Municipal tax: ₹10,000. Net: ₹5.9 lakh. Standard deduction: ₹1.77 lakh (30% of ₹5.9 lakh).

You cannot claim actual repair expenses on top of this. It's either 30% standard deduction OR actual expenses (whichever is higher). Most NRIs use standard deduction as it's simpler.

3. Home loan interest (Section 24(b))

What it is: Interest paid on home loan during the year.

Maximum deduction: ₹2 lakh per year (in old tax regime only).

Applies only if:

You have a home loan on the rented property. You choose old tax regime.

Example:

You paid ₹3.2 lakh home loan interest during the year. You can claim ₹2 lakh (maximum limit).

This reduces your taxable rental income by another ₹2 lakh.

Important: Home loan principal repayment is NOT deductible from rental income. Only interest qualifies under Section 24(b).

What you CANNOT deduct

Society maintenance charges: Not deductible.

Electricity/water bills (if you pay for tenant): Not deductible.

Broker commission: Not deductible.

Home insurance: Not deductible.

Furniture/appliances: Not deductible.

Only three things reduce rental income: municipal tax, 30% standard deduction, and home loan interest (max ₹2 lakh).

How to reduce TDS from 30% to actual slab rate

If you know your actual tax will be much lower than 30%, you can apply for lower TDS deduction.

Form 13 application

What it is: Application to Income Tax Department requesting lower TDS certificate.

When to use: If your expected tax rate is 5% or 10% (much lower than 30% TDS rate).

Process:

Calculate your expected total India income and tax liability for the year. Apply on income tax portal with Form 13. Provide supporting documents (previous ITR, estimated income). Tax department issues lower TDS certificate if satisfied.

Certificate validity: Usually one financial year.

Give certificate to tenant: Tenant deducts TDS at the rate mentioned in certificate (say, 10% instead of 30%).

Example:

Your expected tax rate is 5%. You get lower TDS certificate for 5%. Tenant deducts only 5% TDS instead of 30%. You receive 95% of rent instead of 70%.

Drawback: Time-consuming process. Takes 2-4 weeks to get certificate. Needs renewal every year.

Easier alternative: Let tenant deduct 30% TDS. File ITR and claim refund. This is what most NRIs do.

We help clients decide whether Form 13 is worth the effort based on their specific situation.

Filing ITR to claim rental tax refund

Here's the step-by-step process to get your money back.

Step 1: Gather documents

You'll need:

Rental receipts (month-wise). Form 16C from tenant (TDS certificate). Form 26AS (download from IT portal). Municipal tax payment receipt. Home loan interest certificate (if applicable).

Step 2: Calculate taxable rental income

Gross rent - Municipal tax - 30% standard deduction = Taxable rental income.

If you have home loan: Further reduce by interest paid (max ₹2 lakh in old regime).

Step 3: File ITR-2

ITR-2 is the form for NRIs.

Section to fill: "Income from House Property"

Enter gross rent. Enter municipal tax paid. System auto-calculates 30% deduction. Enter home loan interest (if any). System calculates taxable rental income.

This gets added to your other India income (if any) and total tax is calculated.

Step 4: Report TDS deducted

Form 26AS is pre-filled with TDS details. Verify tenant deducted TDS correctly. Any mismatch needs to be reconciled before filing.

Step 5: Calculate refund

Total tax liability (calculated in ITR). Less TDS already deducted. Difference = Refund due.

If TDS > actual tax: Refund. If TDS < actual tax: You pay the difference.

Step 6: Verify ITR

After filing, verify within 30 days using:

Aadhaar OTP. Net banking. Or physical ITR-V (sent to Bangalore CPC by post).

Without verification, ITR is not considered filed.

Step 7: Wait for refund

Refund processing time: 2-6 months typically.

Refund is credited to your NRO account (the account linked in ITR).

We've helped NRIs recover ₹80,000 to ₹3.2 lakh in rental TDS refunds by filing ITR correctly.

Learn how to file ITR online as NRI.

👉 Tip: Never skip ITR filing if TDS was deducted. Even if you think the math is complicated, the refund is real money you've already earned.

Special cases and complications

Some rental situations are more complex.

Case 1: Property is vacant for part of the year

What if property was unrented for 4 months?

You only report rent for months it was actually rented.

Example:

Property rented Jan-Dec 2025 (12 months): Rent ₹6 lakh. Property vacant Apr-Jul 2025 (4 months): No rent. Property rented Aug 2025-Mar 2026 (8 months): Rent ₹4 lakh.

Total rent for FY 2025-26: ₹4 lakh (only for months when rented).

You cannot claim notional rent for vacant months.

Case 2: You live in the property part of the year

What if you visited India and stayed in your property for 2 months?

If property was self-occupied (not rented) for any part of the year:

Rent is taxable only for months it was actually rented. For months you occupied it, no rental income to report.

Example:

Rented for 10 months: ₹5 lakh. Self-occupied for 2 months: Nil.

Report ₹5 lakh rental income.

Case 3: Tenant pays annual rent in advance

Tax year: Based on when rent is received, not when it's due.

Example:

Tenant pays ₹6 lakh in March 2026 for Apr 2026-Mar 2027 period.

Which year to report?

FY 2025-26: Report ₹6 lakh (year it was received).

FY 2026-27: Report nil (already reported last year).

This is receipt-based accounting for rental income.

Case 4: Property owned jointly

If you and your spouse own property 50:50:

Rental income is split 50:50. Each of you reports 50% in your respective ITRs. TDS certificate should show split (or you split it during ITR filing).

Example:

Total rent: ₹9 lakh. You report: ₹4.5 lakh. Spouse reports: ₹4.5 lakh.

Common rental income tax mistakes

We see these errors constantly.

Mistake 1: Not filing ITR because "TDS is final tax"

The mistake: Assuming TDS deducted = final tax. Not filing ITR.

Reality: TDS is 30%. Actual tax is usually 5-15%. Without filing, you lose ₹1-2.5 lakh refund.

Fix: Always file ITR when rental TDS is deducted.

Mistake 2: Claiming actual expenses instead of 30% deduction

The mistake: Trying to claim actual repair expenses of ₹80,000 on top of 30% standard deduction.

Reality: You get either 30% standard deduction OR actual expenses. Not both.

Fix: Use 30% standard deduction (simpler and usually higher than actual expenses for most NRIs).

Mistake 3: Not claiming home loan interest

The mistake: Having a home loan but not claiming Section 24(b) deduction because you filed in new regime by default.

Reality: Home loan interest (up to ₹2 lakh) is only deductible in old regime. If you have significant home loan interest, old regime saves more tax.

Fix: Calculate tax under both regimes. Choose the one that saves more.

Our team does this automatically for every client.

Mistake 4: Receiving rent in NRE account

The mistake: Asking tenant to pay rent into NRE account.

Reality: This violates FEMA. Rental income must go to NRO account.

Consequence: Bank freezes account during compliance checks. Penalties for FEMA violation.

Fix: Open NRO account specifically for rental income.

Mistake 5: Not keeping rental agreement and receipts

The mistake: Having no documentation. No rent agreement. No payment receipts.

Reality: If tax department asks for proof, you have nothing to show.

Fix: Maintain proper rental agreement. Get month-wise payment receipts from tenant. Keep TDS certificates (Form 16C).

How Belong's tax filing service handles rental income

Let's talk about how we ensure you never overpay on rental tax.

What we do for you

1. Accurate rental income calculation

We collect gross rent details month-wise. We identify municipal taxes you paid. We apply 30% standard deduction correctly. We calculate taxable rental income accurately.

2. Regime optimization

We check if you have home loan interest. We calculate tax under both old and new regime. We choose the regime that saves you more tax.

Real result: We saved a Dubai NRI ₹52,000 by choosing old regime (he had ₹2.8 lakh home loan interest). His CA had defaulted to new regime without checking.

3. TDS reconciliation

We download Form 26AS and match TDS deducted. We identify discrepancies (tenant claimed to deduct but didn't deposit). We ensure you get credit for every rupee of TDS.

4. Refund maximization

We claim all eligible deductions. We file ITR correctly showing rental income under "House Property." We ensure refund is processed quickly.

Real result: We recovered ₹2.18 lakh for a USA-based NRI. Excess rental TDS had been sitting with the tax department for 3 years because he never filed ITR.

5. Multi-property handling

If you have 2-3 rental properties, we handle consolidated reporting. We ensure TDS from all properties is credited. We file single ITR covering all rental income.

Result: You never overpay tax on rental income. You get maximum legal refund. You remain fully compliant.

Book Belong's NRI tax filing service.

Your action plan: Optimize rental tax this year

Step 1: Confirm rent goes to NRO account

If currently going to NRE, switch to NRO immediately.

Step 2: Collect documentation

Rental agreement. Monthly payment receipts. TDS certificates (Form 16C from tenant). Municipal tax payment receipt. Home loan interest certificate (if applicable).

Step 3: Calculate expected tax

Gross rent - municipal tax - 30% standard deduction = taxable income. Apply slab rates. Check if old regime (with home loan deduction) saves more.

Step 4: Decide on lower TDS certificate

If gap between TDS (30%) and actual tax (5-10%) is huge, consider Form 13 for lower TDS. Otherwise, let tenant deduct 30% and claim refund via ITR.

Step 5: File ITR before July 31

Download Form 26AS. File ITR-2 reporting rental income correctly. Verify ITR within 30 days. Wait for refund.

Or let our team handle everything.

We collect your documents. We calculate optimal tax (old vs new regime). We file ITR correctly. We claim maximum refund.

Simple ITR (rental income only): ₹2,500. Standard ITR (rental + other income): ₹4,500.

Book Belong's tax filing service.

Frequently Asked Questions

Is 30% TDS on rent my final tax?

No. TDS is advance tax deducted by tenant. Your actual tax depends on your slab rate after deductions (usually 5-15%). File ITR to claim refund of excess TDS.

Can I avoid TDS by keeping rent below ₹50,000/month?

Yes. If monthly rent is ₹50,000 or below, tenant doesn't need to deduct TDS. But you still report the income and pay tax when filing ITR.

What if my tenant doesn't deduct TDS even though rent is above ₹50,000?

Tenant faces penalties. You're still liable for the tax. Report rental income in ITR and pay tax. Government may send notice to tenant for not deducting TDS.

Can I claim actual repair expenses instead of 30% standard deduction?

Technically yes, but it's complicated. You need to maintain detailed records and prove expenses. Most NRIs use 30% standard deduction as it's simpler and usually higher.

Does home loan principal repayment reduce rental income tax?

No. Only interest paid on home loan is deductible (up to ₹2 lakh under Section 24(b) in old regime). Principal repayment can be claimed under Section 80C, but not against rental income.

Should I choose old or new tax regime for rental income?

If you have home loan interest >₹1 lakh, choose old regime. If no significant deductions, new regime is usually better. We calculate both and recommend the optimal choice.

Can I receive rent in NRE account?

No. Rental income is India-sourced. It must be credited to NRO account only. Receiving rent in NRE account violates FEMA.

NRE vs NRO for property income.

How long does rental TDS refund take?

Typically 2-6 months after ITR filing and verification. Refund is credited directly to the bank account you linked in ITR.

Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Rental income taxation rules, TDS rates, and deduction limits are subject to change. Consult a qualified chartered accountant before making tax decisions. Belong (getbelong.com) is a SEBI-registered investment advisor offering GIFT City-based investment products under IFSCA regulation and professional NRI tax filing services.