Section 393(2): TDS When Your Landlord Is an NRI
NRI landlord means 31.2% TDS, a TAN requirement, and quarterly filings. Step-by-step guide under IT Act 2025.
If your landlord lives outside India, the TDS rules change dramatically. Section 393(2) of the Income Tax Act, 2025 (formerly Section 195) requires you to deduct 31.2%, not 2%, from every rent payment. You also need a TAN, must deposit monthly, and file quarterly returns. Get this wrong and the penalty equals the full TDS amount.
How Is This Different from Section 393(1)?
| Section 393(1): Resident Landlord | Section 393(2): NRI Landlord | |
|---|---|---|
| TDS Rate | 2% | 31.2% (30% + 4% cess) |
| Threshold | Monthly rent > ₹50,000 | No threshold, any amount |
| TAN required? | No | Yes |
| Filing form | Form 141 (monthly) | Form 144 (quarterly) |
| Deposit method | Integrated into Form 141 | Challan 281 (separate deposit) |
| TDS certificate | Form 132 | Form 131 |
| Portal | incometax.gov.in (PAN login) | incometax.gov.in (TAN login) + TRACES |
The rate difference is enormous. On ₹60,000 rent, Section 393(1) deducts ₹1,200. Section 393(2) deducts ₹18,720.
Step-by-Step: What You Must Do
- Apply for a TAN if you don't have one. File Form 49B on the NSDL/Protean website. Processing takes 7-10 days.
- Deduct 31.2% from each rent payment. Pay the balance to your landlord's NRO account (not NRE; this matters).
- Deposit TDS via Challan 281 by the 7th of the following month. Log in to incometax.gov.in with your TAN (not PAN). Navigate to e-Pay Tax → Challan 281.
- File Form 144 (formerly Form 27Q) quarterly on TRACES. This is a consolidated return covering all monthly deposits in the quarter.
- Download Form 131 (formerly Form 16A) from TRACES after the quarterly return is processed. Issue it to your landlord. This is their TDS certificate.
Quarterly Filing Deadlines
| Quarter | Months | Form 144 Due Date |
|---|---|---|
| Q1 | April - June | 31 July |
| Q2 | July - September | 31 October |
| Q3 | October - December | 31 January |
| Q4 | January - March | 31 May |
Challan 281 is due monthly (by the 7th). Form 144 is due quarterly. These are separate deadlines. Missing either triggers penalties independently.
What Counts as NRI?
A person is an NRI if they were outside India for more than 182 days in the preceding financial year. RNOR (Resident but Not Ordinarily Resident) status also triggers Section 393(2).
If you're not sure about your landlord's residency status, ask for a written declaration. The responsibility to deduct correctly falls on you as the tenant.
Can the TDS Rate Be Reduced?
Yes. If your landlord's effective tax rate in India is lower than 31.2% (for example, if they have no other Indian income and fall within basic exemption limits), they can apply for a Lower Deduction Certificate under Section 395(1) (formerly Section 197).
Once issued, you deduct at the lower rate specified in the certificate instead of 31.2%. The certificate is valid for one financial year. Your landlord applies to their jurisdictional Assessing Officer.
DTAA (Double Taxation Avoidance Agreement) benefits may also apply depending on the landlord's country of residence.
Penalties
| Violation | Consequence |
|---|---|
| Failed to deduct TDS | 100% of the TDS amount as penalty under Section 448 (formerly Section 271C) |
| Deducted but deposited late | Interest at 1.5% per month from date of deduction |
| Late filing of Form 144 | ₹200 per day, capped at the TDS amount |
| Failed to deduct at all | Interest at 1% per month from date rent was paid |
On ₹60,000 rent, skipping TDS for a year means ₹2,24,640 in TDS plus potentially another ₹2,24,640 in penalties.
Common Mistakes
- Using the 2% rate. This is the most common and expensive error. 2% is for resident landlords under Section 393(1). NRI landlords require 31.2%.
- Not having a TAN. Unlike Section 393(1), you cannot file with just your PAN. The TAN application takes 7-10 days, so apply before your first rent payment.
- Paying into the landlord's NRE account. Rent to NRI landlords must go to their NRO account. NRE accounts are for foreign earnings remitted to India, not for Indian-sourced income like rent.
- Filing Challan 281 with PAN login. Challan 281 requires your TAN login on incometax.gov.in, not PAN. If you're logged in with PAN, you won't see the right form.
ZentedOut auto-detects NRI landlord status at tenancy setup and tracks the correct section, rate, Challan 281 deadlines, and quarterly Form 144 filings.
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Related: What changed under IT Act 2025 | Section 393(1) for resident landlords | NRI landlords: rent collection guide
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.