Tax on rental income from Indian property for NRIs (2026)

Many NRIs keep a flat or shop in India and let it out. That rent is taxable in India, wherever you live. Since 1 April 2026 the rules sit in the Income-tax Act, 2025. The basic ideas have not changed much, but section numbers and form names have. This guide explains how rent is taxed, how much TDS your tenant must cut, how to get excess TDS back, and how to move the money abroad.

Why Indian rent is taxed in India

Income from property located in India is treated as arising in India. So it is taxable in India even if you are a non-resident and the rent is paid into a foreign account. Your residential status only decides whether your foreign income is also taxed in India. For the basics on residency, read our guide on NRI income tax in India.

Rent is taxed under the head "Income from house property". This covers flats, houses, shops and offices you own and let out. If the property is jointly owned, each co-owner is taxed on his or her share.

How taxable rental income is worked out

You do not pay tax on the full rent. The law allows a few deductions first:

• Annual value: start with the rent you receive or could reasonably receive for the year. Municipal taxes you actually paid as owner are reduced from it.
• Standard deduction of 30%: a flat 30% of the annual value is allowed for repairs and upkeep. You do not need bills for this. Actual repair costs are not deducted separately.
• Home loan interest: interest on a loan taken to buy, build or repair the property is deductible. For a let-out property there is no fixed cap on the interest itself.

Under the 2025 Act these deductions are in section 22. The amount left is added to your other Indian income and taxed at normal slab rates.

Property that is not let out

If you keep up to two homes in India that are not let out, their annual value can generally be taken as nil. In the old regime, interest on a loan for such homes is allowed up to ₹2 lakh in total. In the new regime this interest deduction is not available.

Losses and the tax regime

If interest is higher than the rent after the 30% deduction, you get a loss. In the old regime this loss can be set off against other income up to ₹2 lakh a year, and the rest carried forward. In the new regime (the default), the loss cannot be set off against other heads of income. Pick your regime with this in mind.

Also note: NRIs get the basic exemption limit under the slabs, but the rebate that makes small incomes tax-free is meant for resident individuals. Check the current rules for your tax year before relying on it.

TDS: what your tenant must deduct

This is where most NRIs get surprised. When a tenant pays rent to a non-resident landlord, the tenant must deduct tax at source under section 393(2) of the 2025 Act (this replaced old section 195). Key points:

• Rate: 30% plus surcharge (if applicable) and 4% cess. For most NRIs that is an effective 31.2% of the gross rent.
• No threshold: the ₹50,000-a-month limit that applies to rent paid to residents does not apply. TDS applies from the first rupee.
• Tenant needs a TAN: a tenant paying an NRI cannot use the simple challan-cum-statement meant for resident landlords. The tenant needs a TAN and must file the quarterly non-resident TDS statement (Form 144 under the new rules).
• Remittance forms: where rent is sent abroad, Form 145 is filed and, above prescribed limits, an accountant's certificate in Form 146 (these replaced Forms 15CA and 15CB).
• No PAN: if you do not give your PAN, TDS can be at a higher rate. Always share your PAN with the tenant.

Since TDS is on the gross rent, while tax is on rent after the 30% deduction and interest, TDS is often far more than your real tax. That gap is why lower TDS certificates and refunds matter.

Cutting excess TDS: lower deduction certificate and DTAA

If your real tax on the rent is much lower than 31.2%, you can apply to the tax department for a certificate for lower or nil deduction under section 395. The application is in Form 128 (earlier Form 13). You file it online with an estimate of your income for the year. Once issued, the tenant deducts at the rate shown on the certificate.

Tax treaties rarely reduce tax on rent from property, because most treaties let the country where the property is located tax it. Your home country will usually tax the same rent and give you credit for Indian tax. See our guide on DTAA and TRC for NRIs for how foreign tax credit works.

Filing your return and claiming refunds

If TDS was deducted, file an Indian income tax return for the tax year. This is how you claim credit for TDS and get any excess back. Steps:

1. Collect the TDS certificates from your tenant and match them with your annual tax statement (Form 168, earlier 26AS).
2. Keep the rent agreement, municipal tax receipts and the bank's interest certificate for any home loan.
3. Work out income under each head and choose old or new regime.
4. Use the return form notified for non-residents with house property income for that tax year.
5. Report your status as non-resident and give an Indian bank account for the refund (an NRO account works well).
6. File by the due date (usually 31 July for individuals not under audit; check the current notification) and e-verify the return.
7. For next year, think about applying for a lower TDS certificate in Form 128 early in the tax year.

If you get a notice about your rent or TDS mismatch, we can help with the reply. For end-to-end filing, see our NRI tax filing service.

Receiving rent and sending it abroad

Rent is usually paid into your NRO account. RBI rules allow current income such as rent to be repatriated from the NRO account once tax has been paid or deducted. Your bank will usually ask for Form 145 and, where needed, Form 146.

RBI also allows current income like rent to be credited to an NRE account, if the bank is satisfied that it is current income and tax has been deducted or paid. Practice differs between banks, so ask yours. Our guide on NRE vs NRO vs FCNR accounts explains the differences.

Common mistakes to avoid

• Tenant not deducting TDS at all. The tenant can face interest and penalties, and you may face questions.
• Tenant deducting at resident rates (2% or similar) because they did not know you are an NRI.
• Not filing a return, and so losing refunds of excess TDS.
• Not reporting the same rent in your country of residence. Most countries tax worldwide income of their residents.

Questions people ask

Sources

• RBI Master Direction on Deposits and Accounts (NRE/NRO credits)
• TaxHeal: TDS on rent payment to NRI under the new income tax rules 2026
• TaxHeal: Deductions from income from house property (clause 22, Income Tax Bill 2025)

General information, not advice. Rules change and individual facts matter; take professional advice before acting.