NRI Landlords: Rent Collection Under IT Act 2025
Own property in India, live abroad? Here's how rent collection, TDS, and compliance work under the new Act.
You own a flat in Bangalore but live in Dubai. Or a house in Pune but work in London. The Income Tax Act, 2025 changed the section numbers and form names, but the compliance burden for NRI landlords is exactly the same, and it's substantial.
Here's what you need to know.
What Changed for NRI Landlords
The IT Act 2025 renumbered the sections and forms. Everything else (rates, thresholds, deadlines) stays the same.
| What | Old Name | New Name |
|---|---|---|
| TDS section | Section 195 | Section 393(2) |
| Quarterly return | Form 27Q | Form 144 |
| TDS certificate | Form 16A | Form 131 |
| Deposit challan | Challan ITNS 281 | Challan ITNS 281 (unchanged) |
The TDS rate remains 31.2% (30% + 4% cess). There is no threshold; TDS applies on any rent amount.
Your Tenant's Monthly Checklist
As an NRI landlord, you don't file TDS yourself. Your tenant does. But you need to know what should be happening each month:
- Tenant deducts 31.2% from rent and pays you the balance
- Tenant deposits TDS via Challan 281 by the 7th of the following month
- Tenant files Form 144 quarterly on TRACES
- Tenant issues Form 131 to you after the quarterly return is processed
On ₹60,000 rent, you receive ₹41,280. The remaining ₹18,720 goes to the government as TDS and appears as a credit in your Form 26AS.
NRO Account: Where Your Rent Must Land
Under FEMA regulations, Indian-sourced income like rent must be credited to your NRO (Non-Resident Ordinary) account, not NRE.
- NRO: For income earned in India (rent, dividends, interest). Subject to Indian tax.
- NRE: For foreign earnings remitted to India. Tax-free in India.
If your tenant pays into your NRE account, it's a FEMA violation. Make sure they have your NRO account details.
Repatriation path: NRO → NRE → Your foreign bank account. Up to USD 1 million per financial year can be repatriated from NRO after applicable taxes.
TDS Is Your Tenant's Job, But Your Problem
This is the critical point most NRI landlords miss.
If your tenant doesn't deduct TDS, you still owe income tax on the gross rental income. And since no TDS was deposited, there's no credit in your Form 26AS to offset against your tax liability. You end up paying tax twice: once as income tax, with no TDS credit to show for it.
| Tenant Complies | Tenant Doesn't Comply |
|---|---|
| You receive net rent (₹41,280 on ₹60,000) | You receive full rent (₹60,000) |
| ₹18,720 TDS credit in your 26AS | No TDS credit in 26AS |
| You claim credit when filing ITR | You owe full tax on ₹60,000 with no offset |
The solution: make sure your tenant is actually deducting and depositing. Ask for Challan 281 acknowledgments monthly and Form 131 certificates quarterly.
The Power of Attorney Problem
Many NRI landlords appoint a Power of Attorney (PoA) holder, usually a family member, to manage the property. This creates risks:
- No direct visibility into whether rent was collected or TDS was deposited
- PoA holder may collect rent but not forward it or file TDS
- Unauthorized agreements. PoA holder may sign agreements with terms you didn't approve
- Disputes are harder to resolve from abroad
The core issue is information asymmetry. If you can't see what's happening with your property in real time, you're relying entirely on trust. ZentedOut gives NRI landlords direct dashboard visibility into payments, TDS filings, and agreement terms, without needing a PoA for rent management.
Lower TDS Certificate: Reduce the 31.2% Rate
If your effective tax rate in India is lower than 31.2% (for example, if you have no other Indian income and your rental income falls within basic exemption limits), you can apply for a Lower Deduction Certificate under Section 395(1) (formerly Section 197).
How it works:
- Apply to your jurisdictional Assessing Officer (AO) in India
- Provide details of your Indian income and tax liability
- If approved, AO issues a certificate specifying a lower TDS rate
- Share the certificate with your tenant. They deduct at the lower rate
The certificate is valid for one financial year. DTAA (Double Taxation Avoidance Agreement) benefits may further reduce the effective rate depending on your country of residence.
Typical scenario: NRI with only rental income of ₹7.2 lakh/year, no other Indian income. Effective tax rate under the new regime may be ~5-10%, not 31.2%.
ZentedOut is a free rental portfolio manager: agreements, TDS compliance, rent tracking, and receipts.
Related: Section 393(2) tenant guide | Which form do you need? | What changed under IT Act 2025
This article is for informational purposes only and does not constitute tax or legal advice. Consult a chartered accountant for guidance specific to your situation. Filing procedures and form numbers are based on the Income Tax Act, 2025 as of the date of publication and may change based on subsequent government notifications.