NRI Property Owners in India: Rental Income Tax, TDS Credit and Repatriation for FY 2026-27

NRI rent is taxed after a 30% standard deduction, but tenants withhold 31.2% of gross rent. Cut it with a lower TDS certificate and repatriate via NRO.

Aerial view of the coastal road interchange near Haji Ali, with towers behind

An NRI who owns a let-out flat in Mumbai faces a predictable annual pattern. The tenant withholds roughly a third of the rent. The owner receives the balance in an NRO account. A year later, after filing a return, a refund arrives for most of what was withheld. In the meantime, a meaningful sum has been sitting with the government earning nothing.

None of that is required by the law. It is simply what happens when nobody in the chain manages the process. This is what the position actually looks like for FY 2026-27.

How the income is taxed

Rental income from Indian property is taxed in India regardless of where the owner lives. The source is Indian, so India has the primary right to tax it. The head of income is Income from house property, and the computation is identical for residents and non-residents.

Start with the gross annual value — broadly the rent receivable. Deduct municipal taxes actually paid during the year, which gives the net annual value. From that, deduct:

A flat 30% standard deduction on net annual value, meant to cover repairs and maintenance. You get it whether or not you spent anything.
Interest on a home loan for the property.

Nothing else is deductible. Not society maintenance charges paid by the owner, not brokerage, not property management fees, not painting or renovation. The 30% is intended to cover all of it, and it is claimed instead of, not in addition to, actual expenses.

The resulting figure is added to the NRI's other Indian income and taxed at slab rates. An NRI does not get the benefit of the basic exemption limit being applied against certain special-rate incomes, but for ordinary rental income the slabs apply normally.

The withholding gap

Here is where the cash-flow problem originates. The tenant is required to withhold at 30% plus surcharge and cess — typically 31.2% — on the gross rent, with no threshold at all.

But the owner's actual liability is computed on income after municipal taxes, after the 30% standard deduction, and after loan interest. Take a flat renting at ₹1,00,000 a month:

Item	Amount
Gross annual rent	₹12,00,000
Less: municipal taxes paid	₹20,000
Net annual value	₹11,80,000
Less: 30% standard deduction	₹3,54,000
Taxable income from house property	₹8,26,000
TDS actually withheld at 31.2% of gross	₹3,74,400

The tax on ₹8,26,000 will, for many owners with no other Indian income, be materially less than ₹3,74,400. Add home loan interest and the gap widens further. That difference is an interest-free loan to the exchequer for up to eighteen months.

Most NRI landlords over-withhold by design and under-claim by accident. Both are fixable in an afternoon.

Closing the gap: the lower deduction certificate

The remedy is an application for a nil or lower deduction certificate, made by the owner to the Assessing Officer with a computation of estimated income for the year. If the computation shows a liability of, say, 12% of gross rent, the certificate authorises the tenant to deduct at 12% rather than 31.2%.

Three practical points. The certificate is tenant-specific — a copy must go to each tenant, who then quotes the certificate number when filing. It is year-specific, so it has to be renewed. And it should be applied for early in the financial year; a certificate obtained in February fixes very little.

Where a Double Taxation Avoidance Agreement offers a lower rate, the owner needs a Tax Residency Certificate from the country of residence plus Form 41 (formerly Form 10F) to claim it.

Claiming credit for what was withheld

TDS is not the final tax. It is an advance against the final liability, and the only way to recover the excess is to file an Indian income tax return — generally ITR-2 for an NRI with rental and capital gains income.

Before filing, reconcile three documents: the Form 131 (formerly Form 16A) certificates issued by tenants, Form 168 (the annual tax statement that replaced Form 26AS), and the Annual Information Statement. Credit can only be claimed for tax that actually appears against your PAN. If a tenant deducted but filed under the wrong PAN or never filed the quarterly return, the credit will not appear, and you cannot claim it no matter what your bank statement shows. Chase the certificate every quarter, not every March.

Getting the money out

Rental income from Indian property must be credited to an NRO account. It cannot go into an NRE account, because NRE is reserved for funds sourced abroad.

From the NRO account, repatriation is permitted up to USD 1 million per financial year, after applicable taxes have been paid. This is a per-person limit, so jointly held property with both owners as NRIs effectively doubles the headroom.

The documentation for outward remittance has been renumbered under the Income-tax Rules, 2026: Form 145 is the remitter's declaration and Form 146 is the chartered accountant's certificate, replacing Form 15CA and Form 15CB. Submissions made for remittances up to 31 March 2026 under the old forms remain valid.

Two more things worth knowing

A second property is not automatically taxed. An NRI may treat up to two house properties as self-occupied with nil annual value. Beyond two, a deemed rent applies to the others even if genuinely vacant.

Selling is a different problem entirely. When an NRI sells Indian property, the buyer must withhold at the applicable capital gains rate on the entire sale consideration, not the 1% that applies to purchases from residents. Buyers regularly get this wrong, and the resulting default is theirs. If a sale is on the horizon, plan the withholding certificate well in advance.

A practical annual rhythm

April: apply for the lower deduction certificate for the new year; circulate it to tenants.
Quarterly: collect Form 131 from each tenant and check it against Form 168.
Through the year: keep municipal tax receipts and loan interest certificates — they are your only real deductions.
Post year-end: file the return, claim the credit, and reconcile the AIS before submitting.
Once taxes are settled: repatriate within the USD 1 million window using Forms 145 and 146.

Frequently asked questions

How much TDS is deducted on rent paid to an NRI?

The tenant withholds 30% plus cess, typically 31.2%, on the gross rent, with no threshold.

How is an NRI's rental income taxed in India?

Under Income from house property. Municipal taxes paid are deducted, then a flat 30% standard deduction and home loan interest. The balance is taxed at slab rates.

How can an NRI reduce TDS on rent?

By applying to the Assessing Officer for a nil or lower deduction certificate early in the financial year and giving a copy to each tenant.

How much rental income can an NRI send abroad?

Up to USD 1 million per financial year from an NRO account, after taxes are paid, using Form 145 and Form 146.

General information only, not tax or legal advice. Cross-border tax positions turn on individual facts — please consult a chartered accountant.

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