Here’s a Quick Way to Understand the TDS On Rent To NRI

Did You Know?

Many NRI Owners and Tenants Like You are Now Complying with TDS On Rent to NRI In India

Which is a One Time Set Up Procedure, Beneficial, Convenient, Ensures Full Tax Compliance for Both of You.

So, Here are some of the Benefits for the Tenants and the NRI Owners.

Tenant is Not Liable to Pay Penalty, Interest, Late Fee,

If he Deducts TDS on Rent To NRI at 31.2%

On the Property Owned by the NRI,

He Pays Net Rent Amount to the Owner and

TDS Amount to the Government and

Files TDS Return Accordingly and

Issues Form 16A to the NRI owner.

NRI is not Liable to Deduct TDS on Rent at all,

But Can Apply for Lower TDS Deduction Certificate,

And Can Claim Excess TDS Deducted as Refund while Filing His Return Of Income In India.

TDS On Rent To NRI
TDS On Rent To NRI

Case Study 1: One of My Clients Who is a Resident Tenant Contacted Me Recently While Taking a Residential Property on Rent from an NRI Owner.

The usual Norm out of Ignorance is to Deduct 10%, Which is Not as per Income Tax Law.

When She Got in Touch with me, I Immediately Advised her to Inform the Owner About the TDS Laws in India and That Relevant TDS Provisions and Statutory Compliances Needs to be Followed to Avoid Penalty, Interest, Late Fee later.

The Owner Readily Agreed to Abide by the Law and Consequently, all TDS Payments Were Done at 31.2% and Periodic Quarterly TDS Returns Were Filed Respectively Without Any Delay and The Entire Initial Procedure of Applying for DSC, TAN, TDS Payment, TDS Return Filing & Downloading of TDS Certificate were Completed Within 8-10 days.

Case Study 2: Another NRI Client Who is an NRI Owner of a Property in India, approached me to get a Lower TDS Certificate from The Income Tax Department for 3 Reasons,

a) The Actual Tax Slab Applicable to him Based on his Total Income in India was Much Below 31.2%.

b) Benefit of Lower TDS Deduction Rates can be Availed in Such Cases. But there is Nothing Like TDS Waiver For NRI.

c) Higher Liquidity Immediately, Instead of Waiting for At least a Year till Non-Resident Indian Income-tax is Filed in India and Refund of Tax Paid in Excess of TDS Deducted can be Claimed.

I Helped him Through the Entire Process of Shifting his File to International Income Tax Jurisdiction, Applying for Lower TDS Rate in Form 13, and Filed Form 15CA and 15CB – CA Certificate for Repatriation of Funds from India to his Country of Residence, Thereby Concluding with Filing his Income Tax Return in India on Completion of the Year thereby Claiming TDS Refund of Excess Amount Paid.

TDS On Rent Paid To Non-Resident?

There are some Owners-Tenants Like you Who are Unaware About TDS Provisions.

You, as a Tenant Approach an NRI Owner to Take the Property on Rent,

You Pick up a Property in an Urgency or Due to its Infrastructure, Other Facilities and Rent Budget Matching Your Requirements,

And the NRI Owner Wishes to Close the Deal with you Because of his/her Comfortability with You and Your Family and Many Other Factors in a Win-Win Situation.

TDS Provisions Usually Takes a Back Seat in this Discussion, Either Due to Ignorance of TDS Provisions for Both or Due to Lack of Knowledge of Experienced Support System to Help You Both in Streamlining this Entire Process.

Also, if You are an NRI Owner Who is not Residing in India have Your Own Hardships of Managing the Entire Procedure Through Your Representative Professional in India.

Setting up the TDS Payment & Return Filing System is Extremely Crucial for Both to Avoid Penalty, Interest & Late Fees ,Getting Lower TDS Deduction Certificate and Claiming Refund Of TDS Deducted

This TDS Provision can be Handled Seamlessly Either by Doing it Yourself Except 15CB Form (CA Certificate) or by Outsourcing the Entire Procedure to a Professional.

What is the TDS Rate For NRI?

It Has Been Seen that there is a Confusion Regarding, what is the Rate of TDS on Rent on NRI?, as There are Different Rates Applicable in the Case of Short Term Capital Gains, Long Term Capital Gains Earned by NRI u/s 195, and Other Incomes on Investments. Tax Rate Applicable for NRI on TDS on Rent is 31.2%.

Moreover, TDS is Applicable to NRI on all Payments Made Like the Purchase or Sale of Property in India, Capital Gains, Investment Incomes, and Others.

TDS on Rent to NRI rate is 31.2%
TDS on Rent to NRI rate is 31.2%

Do You Want to Know the Rules for TDS On Rent To NRI Landlord?

Section 195 of the Income-tax Act Deals with the Liability to Deduct TDS on Rent When the Owner/Payee/Landlord is a Non-resident/Foreigner AND the Tenant/Payer may be any Person Resident in India. The Tenant may be any Person be it, Individual, HUF, Firm, Company, AOP, BOI, or any Other Artificial Jurisdiction Person. 

Tax is Deducted at Source at the Rate Applicable in this case will be 31.2%.

There is No Threshold TDS limit for Rent Mentioned for NRI /Foreigners with Respect to the Tax to be Deducted At Source. There are No TDS Implications on Refundable Deposits.

The Rent Proceeds Should be Credited to the NRO account of NRI.

If You as a Resident Tenant Makes the Payment from Your Regular Bank Account in India to a Foreign Country or to the Account of the NRI Maintained in a Foreign Country or Outside India, Where the NRI is Situated, or if the NRI Owner Transfers the Funds Abroad From his/her NRO Bank Account in India, then 15CA and 15CB Will have to be Filed and Obtained Respectively by the Tenant/Owner to Repatriate Funds Out of India.

TDS on Rent to NRI Landlord
TDS on Rent to NRI Landlord

Procedure to be Followed by the Tenant in Case of TDS On Rent To NRI For FY 2023 24,

Class 3 Digital Signature Certificate Application.

Applying for Tax Deduction Account Number (TAN)

Payment of TDS u/s 195

TDS Return Filing in Form 27Q

Can TDS Return be Revised

Download Form 16A From Traces Website.

  • Class 3 DSC is Mainly Required to File TAN Application Online with DSC, Which Makes the Process Much Faster and Easier. TAN Application Can also be Done Online Without DSC, Which Involves Offline Submission of Documents After Submission of the Application Form. DSC is Valid for At least 1 to 3 Years Maximum.
  • DSC Based TAN Application: TAN Application can be Done Online and it Gets Approved Within 2-3 Business Working Days by the Income Tax Department.
  • Next Step Involves TDS Deduction from Rent Amount and Payment of TDS in Challan No. ITNS 281 u/s 195.
  • TDS Return Filing in Form 27Q has to be Done on a Quarterly Basis. This can be done by Downloading Utility for TDS Return Filing Online or Through Various Software Available. Processing of TDS Returns at the Department Level Usually Takes Around 8-10 days.

Details and Documents Required in Completing the Entire Process of TDS Filing by the Tenant,

Name, TAN, PAN, Address, Mobile no, Email ID, Pan Card copy, Aadhaar copy, Photo is Required.

Whereas in the Case of Owner, the Following Details and Documents are Required, Such as Name of the Owner, PAN of the Owner, Address of the Owner in Foreign Country, NRO Bank a/c Details.

  • Can TDS Return be Revised- Once TDS Return is Filed, it can Very Much be Revised and Corrections can be Made Online Using DSC.
  • Form 16A- TDS Certificate can be Downloaded from Traces Website After Registering on it as a Deductor.

The Details of TAN, TDS Challan, and 1st TDS Return Filed Acknowledgment are Required for Registering on Traces Website.

Net Rent to be Deposited in the NRO Bank Account of the Owner by the Tenant.

Let’s Have a Look at the TDS Deposit and TDS Return Filing Due Date for FY2023-24,

MonthsDue Date Of TDS PaymentDue Date Of TDS Return Filing Quarterly
AprilOn Or Before 7th May
May On Or Before 7th June
June On Or Before 7th JulyOn or Before 31st July
July On Or Before 7th August
August On Or Before 7th September
September On Or Before 7th October On or Before 31st October
October On Or Before 7th November
November On Or Before 7th December
December On Or Before 7th January On or Before 31st January
January On Or Before 7th February
February On Or Before 7th March
March On Or Before On or Before 31st May
TDS On Rent to NRI Return Filing Due Date for FY2023-24

What is the 5-step TDS compliance from NRI Owners’ Perspective:

PAN Migration

Lower TDS Deduction Certificate Deduction TDS Certificate

Form 15CA: for Remittance

Form 15CB: for Remittance

Income Tax Return for NRI for AY2024-25

  • 1. PAN Migration- Transfer of PAN to International Jurisdiction. PAN Migration to be Done from Local to International Jurisdiction of NRI Owner. This is to be Done Once in a Lifetime for NRI.
  • Certificate for Lower Deduction Of TDS- Beneficial for Owner to be Applied U/s 197 in Form 13 for Lower Deduction of TDS Every Year.
  • Form 15 CA & 15CB: for Remittance- For Transfer of Funds from NRO to NRE Bank a/c or Transfer to any Bank Account Abroad, Form 15CA 15CB Will be Required. Details Required are Name, Address, Bank account of the Transferor and Transferee and PAN will be Required While Filing Form 15CA & 15CB.
  • Non-Resident Indian Income Tax Return – Income Tax Return Form for NRI Needs to be filed in INDIA for all incomes earned or received in INDIA. If the Tax on Total Income is Less than TDS Deducted, then Refund for the Differential Excess can be Claimed by Filing the Income Tax Return Annually.

Let us Have a Look at the Parts of Form15CA and the Applicability of 15CB:

Parts to Form 15CARequirementsForm 15CB: CA Certificate
Part APayment<5lacsNA
Part BPayment>5Lacs but Lower TDS Deduction Certificate Obtained u/ 197NA
Part CPayment>5lacsRequired to be Submitted Before Filing Form 15CA
Part DPayment>5LacsNA
Form 15CA and 15CB

15CA CB Applicability –Form 15CA Will Not be Required by an Individual for Remittance, which does not Require RBI Approval.

Is GST Applicable on Rental Income? 

GST on Rental Income is Exempt on Residential Property (Other Than for Commercial Purpose) but is Applicable at 18% on All Other Properties/Commercial Properties in Excess of Rs.20Lacs Rental Income.

There are Certain Implications for Non-Compliances of TDS Provisions

TDS on Rent to NRI Provisions Include Deduction and Timely Payment of TDS Along with Regular and Periodic Filing of TDS returns, Failing Which, Penalty, Interest and/or Late fees Shall Apply Accordingly.

The penalty can be Equal to the TDS Amount to Rs.10,000 to a maximum of Rs.1,00,000/-, Interest is Applied at 1.5% Per Month or Part Thereof for Late Payment of TDS, Late Fees for Delay in Filing TDS Return is Rs.200 Per Day.

TDS ON RENT TO NRI
TDS ON RENT TO NRI
  • So, what are You Waiting For?

Just Go Ahead and Get Your TDS Paid and TDS Returns Filed Before You Miss the Due Date.

I Will be Writing Articles on TDS and Other Income Tax Related Matters Based on My Work Experience of the Past 15 Years and My Ongoing Efforts to Help You Understand Various Tax Laws in the Simplest Possible Ways with Case Studies.

If you want any clarifications about TDS on Rent Paid to NRI, send your details to [email protected]

You can also contact me here for any query on TDS on rent.

5 thoughts on “Here’s a Quick Way to Understand the TDS On Rent To NRI”

  1. SURENDRA DIDWANIA & CO

    Dear Sir, Please point out the RBI purpose code to be used in form 15CA for remmitance of Rent to NRI ( NRO) account.

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