Renting an Apartment from an NRI Landlord? Here's What Tenants Need to Know About TDS Rules
Bengaluru, May 9: Tenants renting from NRI landlords must deduct 30% TDS plus surcharge and cess (effective 31.2% in most cases) with no minimum rent threshold. The compliance burden is increasingly influencing rental decisions in cities like Bengaluru.
Why TDS Applies to NRI Landlords
"Rent from property situated in India is legally deemed to accrue or arise in India under Section 9(2)(b), making it taxable in India. Hence, TDS has to be deducted by the tenant when paying rent to NRI landlords," said Vivek Jalan, partner at Tax Connect Advisory Services LLP. Under the Income-tax Act 2025, the TDS rate on rent paid to an NRI is 30% plus applicable surcharge and cess. The rate can rise further if the NRI's annual income exceeds ₹50 lakh.
No Minimum Threshold for NRIs
Unlike rental payments to resident landlords, where the 2% TDS requirement under Section 194-IB applies only if rent exceeds ₹50,000 per month, there is no minimum exemption threshold for TDS deduction on rent paid to NRIs. Rent from property in India is legally deemed to accrue or arise in India, making it taxable here regardless of the amount.
Tenant's Compliance Burden
Tenants must deposit TDS every month through the income tax portal, file quarterly TDS statements in Form 144 for non-resident payments, and furnish remittance details through Form 145. If taxable rent remittances exceed ₹5 lakh in a financial year, tenants may also need an accountant's certificate in Form 146. A TDS certificate in Form 131 must be issued to the landlord. Common mistakes include deducting TDS at incorrect rates, missing monthly deposit deadlines, and failing to obtain a TAN.
Lower Deduction Certificate Option
If the NRI landlord believes the actual tax liability would be lower, either the tenant or the landlord can approach the Assessing Officer under Sections 395(1) or 395(2) to obtain a certificate for lower or nil deduction of tax. However, experts note that this complexity has begun to affect rental transactions in premium markets, with tenants often withdrawing from deals upon realizing the compliance burden.