Is Rental Income Taxable for NRIs in India
Yes.
Under the Income Tax Act 1961, any rent received from property located in India is fully taxable in India, even if the NRI lives abroad.
Rental income for AY 2025 26 must be reported under the “Income from House Property” schedule.
NRIs must file ITR even if:
- Rent is received abroad
- Property is co owned
- Rent is small
- Tenant has deducted TDS
Rental income earned by NRIs in India is fully taxable and must be reported in ITR 2 or ITR 3 for AY 2025 26.
TDS Rules on Rent Paid to NRIs in 2026
Tenants must deduct TDS before paying rent to an NRI landlord.
TDS on NRI Rent
- Rate: 30 percent
- Plus surcharge and cess
- Deduction happens monthly
- Tenant must deposit TDS using Form 26QC
- Tenant must issue Form 16C to the NRI
This is mandatory even if:
- The NRI does not file ITR
- The rent amount is small
- The NRI instructs otherwise
Tenants must deduct TDS at 30 percent when paying rent to an NRI landlord.
How NRIs Are Taxed on Rental Income
NRIs are taxed on net taxable rental income, not the full rent.
Taxable = Gross Rent minus Deductions
Standard Deduction
Flat 30 percent deduction allowed on net annual value.
Municipal Taxes Paid
Allowed if paid by the owner.
Home Loan Interest
Fully deductible on self occupied or rented property.
Pre Construction Interest
Allowed over five years.
Example of Rental Income Calculation for NRIs
Monthly rent: INR 40,000
Annual rent: INR 4,80,000
Municipal taxes: INR 20,000
Home loan interest: INR 1,50,000
Step 1: Net Annual Value
Annual rent minus municipal taxes
= 4,80,000 minus 20,000
= 4,60,000
Step 2: Standard Deduction (30 percent)
= 1,38,000
Step 3: Home Loan Interest
= 1,50,000
Taxable Rental Income
= 4,60,000 minus 1,38,000 minus 1,50,000
= 1,72,000
If tenant deducted TDS at 30 percent each month, the NRI will be eligible for a large refund.
DTAA Benefits on NRI Rental Income
NRIs in countries with DTAA agreements can:
- Reduce the tax burden
- Claim tax credit abroad
- Avoid double taxation
- Reduce effective rates when eligible
To claim DTAA, NRIs must upload TRC and Form 10F while filing ITR for AY 2025 26.
ITR Filing Rules for NRIs With Rental Income
NRIs must file ITR in India if:
- Total taxable income exceeds INR 2.5 lakh
- They want to claim TDS refund
- They want to report rental income
- They want to carry forward loss
Required forms:
- ITR 2 for normal rental cases
- ITR 3 for rental plus business income
Documents Required
Form 26AS | AIS | Rent receipts | Municipal tax receipts | Loan interest statements | TDS certificates (Form 16C) | Bank statements
Refunds will be delayed if AIS does not show rent or if tenant failed to file Form 26QC. NRIs should get these corrected early.
What If the Tenant Does Not Deduct TDS
NRIs are still responsible for declaring rental income in their ITR even if the tenant:
- Did not deduct TDS
- Did not file Form 26QC
- Paid rent in cash
- Paid rent to an overseas account
The NRI must request the tenant to correct TDS filings.
If the tenant refuses, the NRI can still file ITR and declare income correctly.
How NRIs Can Claim TDS Refund on Rental Income
If the tenant deducted excess TDS (very common), the NRI can claim a refund by:
- Reconciling Form 26AS
- Reconciling AIS
- Filing ITR 2
- Applying DTAA if applicable
- Validating ITR
- E verifying the return
Refunds usually take 30 to 90 days.
How NRIHelpLine Helps NRIs with Rental Income Taxation
Our tax experts assist with:
- Calculating net taxable rental income
- Reviewing standard deduction eligibility
- Loan interest deductions
- DTAA claim
- TDS correction support
- TDS refund assistance
- Filing ITR 2 or ITR 3
- Managing rental income for multiple properties
- Documentation support for AY 2025 26
FAQs
Q. Is rental income taxable for NRIs?
Q. How much TDS is deducted on NRI rent?
Q. Do NRIs get standard deduction?
Q. Can NRIs claim home loan interest?
Q. Which ITR form for rental income?
Q. Can NRIs claim a refund of excess TDS?
Talk to our experts now
Other services
Expert’s Note
Many NRIs lose refunds because they do not claim eligible deductions such as standard deduction, municipal taxes, and interest on home loans.
Sanjeev Sharma
(Advocate – NRI HelpLine Tax & Property Law Specialist)
Read More…
