TDS on NRI Rental Income in 2026: Critical Information Every NRI Landlord Must Know
Renting out a property in India can provide a regular source of income for Non-Resident Indians (NRIs). However, the TDS rules for rent paid to an NRI landlord are different from the rules that apply when the landlord is an Indian resident.
Problems often arise when the tenant does not know that the landlord is an NRI. The tenant may apply the resident-landlord TDS rules, which can result in short deduction of tax, interest, correction of TDS filings and problems with the landlord’s tax credit.
There is also an important change from 1 April 2026. The Income-tax Act, 2025 now applies to relevant transactions from that date, replacing the Income-tax Act, 1961 for new transactions. The Income Tax Department has clarified that the applicable law depends on when the earlier of credit or payment takes place.
This article explains the TDS rate on NRI rental income in 2026, which section applies, what the tenant needs to do, how an NRI’s taxable rental income is calculated, and when a lower TDS certificate may help.
A Real-World Example: Why NRI Status Matters
Consider an NRI who owns an apartment in Mumbai and rents it to a salaried professional for ₹90,000 per month. The landlord provides an Indian PAN, Indian property address and bank details, but does not clearly tell the tenant that they are a non-resident for Indian income-tax purposes.
The tenant may assume that the landlord is resident and use the resident-rent TDS provisions. This can result in less tax being deducted than required under the rules for payments to a non-resident.
The tenant may then have to calculate the shortfall, pay applicable interest and correct the TDS statement. The NRI landlord may also face delays or mismatches when checking the tax credit.
This is why the landlord’s tax residential status should be clearly communicated before rent payments begin. Having an Indian PAN, Indian bank account or property in India does not by itself make a person resident for Indian income-tax purposes.
Why TDS on NRI Rental Income Is Different
TDS stands for Tax Deducted at Source. It means that the person making a payment deducts the applicable tax before paying the balance amount to the recipient.
When rent is paid to an NRI landlord, the tenant has to follow the TDS provisions that apply to payments made to a non-resident. The resident-rent provisions should not be used simply because the property is located in India.
For transactions governed by the Income-tax Act, 2025, ordinary taxable rent paid to an NRI is generally covered by Section 393(2), Table Sl. No. 17, which applies to interest and other sums chargeable under the Act and uses the applicable “rates in force.”
What Is the TDS Rate on Rent Paid to an NRI in 2026?
For ordinary rental income received by an individual NRI, the base withholding rate is generally 30% under the applicable rates-in-force framework. Applicable surcharge may increase the amount in higher-income cases, and Health & Education Cess at 4% is then added on the income-tax plus surcharge, where applicable.
Where surcharge does not apply, the effective withholding works out to 31.2%. This is calculated as 30% income-tax plus 4% cess on that tax.
Example: Monthly Rent of ₹1,00,000
| Particular | Amount |
| Monthly rent | ₹1,00,000 |
| Base TDS at 30% | ₹30,000 |
| Surcharge | Nil in this example |
| Health & Education Cess at 4% | ₹1,200 |
| Total illustrative TDS | ₹31,200 |
| Amount paid to NRI landlord | ₹68,800 |
This example assumes that no surcharge applies and that there is no lower or nil deduction certificate. The actual withholding may be different where surcharge, a valid certificate, treaty provisions or other specific tax rules apply.
TDS on Rent to NRI: Which Section Applies in 2026?
The applicable section depends on when the TDS obligation arises. For this type of payment, the important point is generally the earlier of credit or payment.
The Income Tax Department has specifically clarified this rule for the transition from the old Act to the Income-tax Act, 2025.
Before 1 April 2026: Section 195
Where the earlier of credit or payment took place on or before 31 March 2026, the Income-tax Act, 1961 continues to apply. Taxable rent and similar payments to non-residents were generally covered by Section 195.
This remains relevant even if some related compliance work takes place after 31 March 2026. Once the TDS obligation arose under the old Act, the old-law framework continues to govern that transaction.
From 1 April 2026: Section 393
Where the earlier of credit or payment takes place on or after 1 April 2026, the Income-tax Act, 2025 applies. Ordinary taxable rent paid to an NRI is generally covered by Section 393(2), Table Sl. No. 17.
| Relevant TDS Event | Applicable Law | Main Provision |
| Up to 31 March 2026 | Income-tax Act, 1961 | Section 195 |
| From 1 April 2026 | Income-tax Act, 2025 | Section 393(2), generally Sl. No. 17 |
The date on which the rental agreement was signed does not by itself decide which Act applies. An older rental agreement can therefore have rent payments covered by the new Act when the relevant credit or payment takes place from 1 April 2026 onwards.
Resident Landlord vs NRI Landlord TDS Rules
The TDS rules for resident and non-resident landlords are different, so the two should not be mixed. In particular, the old statement that rent paid to a resident landlord always attracts 5% TDS is not an accurate description of the 2026 rules.
Under Section 393(1), resident-rent provisions can prescribe 2% or 10%, depending on the payer and the type of asset involved. Certain resident-rent provisions also use a threshold of ₹50,000 per month or part of a month.
| Situation | General 2026 Position |
| Certain rent payments to resident landlords | 2%, subject to applicable conditions |
| Specified rent of land, building, furniture or fittings to resident | 10%, subject to applicable conditions |
| Specified rent of machinery, plant or equipment to resident | 2%, subject to applicable conditions |
| Ordinary rent paid to an individual NRI | Generally 30% base rate plus applicable surcharge and cess |
The first step should therefore always be to correctly identify the landlord’s residential status. The tenant should not choose the TDS rate only by looking at the landlord’s PAN, bank account or Indian property address.
Who Must Deduct TDS on Rent Paid to an NRI?
The responsibility is not restricted to companies and businesses. Section 393(2) can apply to any person responsible for making the relevant taxable payment to a non-resident.
This means an individual tenant, HUF, company, partnership, business or another payer can have a TDS responsibility. It can also apply whether the property is being rented for residential or commercial use.
An individual renting a home from an NRI should therefore not assume that TDS does not apply simply because the tenant is not running a business. The landlord’s non-resident status changes the applicable withholding framework.
Is There a Minimum Rent Threshold for TDS Paid to an NRI?
There is no specific ₹50,000-per-month threshold in Section 393(2), Sl. No. 17 for ordinary taxable payments made to a non-resident. The ₹50,000 monthly threshold appears in separate resident-rent provisions under Section 393(1).
This means rent below ₹50,000 per month can still fall within the NRI withholding provisions where the payment is chargeable to tax in India. A tenant should therefore not use the resident-rent threshold to decide whether rent paid to an NRI is outside TDS.
How to Calculate TDS on Rent Paid to an NRI
In a normal situation where there is no lower or nil deduction certificate, the tenant applies the applicable withholding rate to the relevant payment. Applicable surcharge is added where required, followed by Health & Education Cess.
For example, assume annual rent is ₹12,00,000 and surcharge does not apply. The illustrative calculation would be as follows.
| Particular | Amount |
| Annual rent | ₹12,00,000 |
| Base TDS at 30% | ₹3,60,000 |
| Health & Education Cess at 4% | ₹14,400 |
| Total illustrative TDS | ₹3,74,400 |
The effective withholding in this example is 31.2%. However, this does not mean that 31.2% will necessarily be the landlord’s final tax rate on rental income.
Is TDS Deducted on Gross Rent or Taxable Rental Income?
TDS withholding and the landlord’s final income-tax calculation are two different processes. In a routine case, the tenant should not independently reduce the rent by municipal taxes, the 30% house-property deduction or the landlord’s home-loan interest and then apply TDS to the reduced amount.
Those deductions are considered while calculating the landlord’s taxable income from house property. If the normal withholding would result in excessive TDS, the NRI landlord may consider the statutory lower or nil deduction process.
An NRI can apply under Section 395(1) using Form 128 for a lower or nil deduction certificate. In an appropriate case, the payer may also apply under Section 395(2) using Form 129 for determination of the appropriate proportion of the payment that is chargeable to tax.
The tenant should therefore not decide on a lower amount or rate without a valid statutory basis. This helps avoid both short deduction and unnecessary withholding.
How Is NRI Rental Income Taxed in India?
The TDS deducted by the tenant is not necessarily the NRI landlord’s final income-tax liability. Rental income from property is separately calculated under the provisions for Income from House Property.
For a let-out property, the annual value is determined under Section 21. It is not always simply the same as the rent actually received, because expected rent, actual rent, vacancy and unrealised rent can affect the calculation.
Municipal taxes borne and actually paid by the owner are considered in arriving at the relevant annual value. Section 22 then allows a 30% deduction from annual value and eligible interest on borrowed capital, subject to the applicable conditions.
Example of Rental Income Calculation
For simplicity, assume the Gross Annual Value is ₹12,00,000 and there is no vacancy or unrealised-rent adjustment.
| Particular | Amount |
| Assumed Gross Annual Value | ₹12,00,000 |
| Less: Municipal taxes actually paid by owner | ₹60,000 |
| Net Annual Value | ₹11,40,000 |
| Less: 30% standard deduction | ₹3,42,000 |
| Less: Eligible home-loan interest | ₹3,00,000 |
| Illustrative income from house property | ₹4,98,000 |
The tenant may still have deducted TDS using the applicable withholding provisions. The landlord’s final taxable house-property income can be much lower because eligible deductions are considered separately when taxable income is calculated.
Municipal taxes generally need to be actually paid by the owner to qualify for deduction. For a let-out property, eligible interest on borrowed capital can also be deducted, although the treatment of losses and their adjustment against other income can depend on the applicable tax rules and the NRI’s individual circumstances.
For wider information about rental documentation and property management, this section is a natural place to internally link to PrimeWealth’s NRI property rental guide.
How Should a Tenant Deduct and Deposit TDS for an NRI Landlord?
The tenant should first confirm whether the landlord is a non-resident for Indian income-tax purposes. The correct PAN, legal name, address and other required tax details should then be obtained before TDS reporting begins.
A tenant following the normal NRI TDS process generally requires a Tax Deduction and Collection Account Number (TAN). Under the Income-tax Rules, 2026, Form 135 corresponds to the earlier Form 49B(2) and is the TAN application for a non-government applicant.
The tenant should calculate the applicable TDS using the correct rate. Where the NRI has a valid lower or nil deduction certificate, the tenant should use the rate authorised in that certificate rather than selecting another rate independently.
For a normal non-government deductor, TDS for months other than March is generally deposited within seven days from the end of the month in which tax is deducted. TDS deducted during March is generally due by 30 April.
For non-salary payments to a non-resident under the post-1 April 2026 framework, the quarterly TDS statement is Form 144, which corresponds to old Form 27Q.
| Quarter Ending | Form 144 Due Date |
| 30 June | 31 July |
| 30 September | 31 October |
| 31 December | 31 January |
| 31 March | 31 May |
After the statement is filed, the applicable non-salary TDS certificate is issued in Form 131, which corresponds to old Form 16A. Form 131 is generally due within 15 days from the due date for the relevant quarterly TDS statement.
Does a Tenant Need TAN When Paying Rent to an NRI?
Generally, yes. A tenant deducting TDS under the normal non-resident payment provisions generally needs a TAN for the deduction, deposit and reporting process.
For a non-government applicant, Form 135 is the current TAN application under the 2026 Rules. This is different from certain simplified challan-cum-statement procedures available for specified payments to resident landlords.
Can an NRI Apply for Lower TDS on Rental Income?
Yes. An NRI may consider applying for a lower or nil deduction certificate where normal withholding on rent is expected to be much higher than the final Indian tax liability.
Under the Income-tax Act, 2025, the relevant provision is Section 395(1). The prescribed application is Form 128, which corresponds to old Form 13.
Form 128 is filed electronically through the Income Tax Department’s TRACES system. The Department advises applicants to apply well before the transaction because the certificate should be available before the tax is deducted, and an application cannot be processed after the relevant TDS transaction has already been completed.
If a certificate is issued, the tenant should deduct tax using the rate authorised in that certificate. The NRI should not simply ask the tenant to use a lower percentage without the required approval.
This section is a suitable place to internally link to PrimeWealth’s NRI tax advisor in India page.
When Can a Lower TDS Certificate Help?
Consider an NRI landlord whose property’s Gross Annual Value is assumed to be ₹24,00,000. For simplicity, assume there is no vacancy or unrealised-rent adjustment.
Also assume that the landlord actually pays ₹1,00,000 in eligible municipal taxes and has ₹8,00,000 of eligible home-loan interest.
| Particular | Amount |
| Assumed Gross Annual Value | ₹24,00,000 |
| Less: Municipal taxes actually paid | ₹1,00,000 |
| Net Annual Value | ₹23,00,000 |
| Less: 30% standard deduction | ₹6,90,000 |
| Less: Eligible home-loan interest | ₹8,00,000 |
| Illustrative income from house property | ₹8,10,000 |
By comparison, withholding on ₹24,00,000 at an illustrative 31.2%, assuming no surcharge and no lower certificate, would be ₹7,48,800.
This does not mean the NRI’s final tax liability is automatically based only on ₹8,10,000. Other Indian income, losses, tax regime, eligible interest, surcharge, treaty provisions and other circumstances can affect the final tax.
The example simply shows why an NRI may consider a lower TDS certificate where normal withholding is significantly higher than the expected final tax liability. The actual permitted rate depends on the certificate issued by the tax authority.
How Can an NRI Claim Excess TDS Refund?
If the TDS credited to the NRI is more than the final Indian income-tax liability, the excess can generally be claimed through the applicable Indian income-tax return. The NRI should correctly report the rental income, eligible house-property deductions, other taxable Indian income and available tax credits.
The final tax computation determines whether additional tax is payable or whether a refund is due. This is why an NRI should not treat the amount deducted as TDS as the final tax on rental income.
How Can an NRI Check Whether the Tenant Deposited TDS?
An NRI should regularly check the tax information available through the Income Tax e-filing system. For periods governed by the old Act up to Assessment Year 2026-27, the legacy AIS/Form 26AS framework remains relevant.
For the Income-tax Act, 2025 framework beginning with Tax Year 2026-27, Form 168 is the Annual Information Statement. It contains information including TDS, TCS, tax payments, refunds and other tax-related information.
The NRI should compare the tax information with the rent received and the Form 131 certificate issued by the tenant. If TDS is missing, the tenant should check whether the tax was deposited, whether Form 144 was filed and whether the correct PAN and amount were reported.
If the wrong PAN or amount was used, a correction statement may be required. The landlord should continue checking the tax record until the corrected credit appears.
What Happens If the Tenant Uses the Wrong TDS Rate?
If the tenant incorrectly treats an NRI landlord as a resident landlord, there may be a short deduction of TDS. The error should be reviewed and corrected rather than allowing the incorrect treatment to continue.
Depending on the facts, the tenant may need to calculate the shortfall, deposit additional TDS, pay applicable interest and correct the TDS statement. Corrected tax information or a corrected TDS certificate may also be required.
The Income Tax Department has confirmed that using an old Act section for a transaction governed by the new Act can cause processing or validation problems and may require a correction statement.
Interest and Other Consequences for NRI Rent TDS Non-Compliance
Interest and penalties are not the same. Section 398 separately sets out interest for failure to deduct tax and for delay in paying tax after it has already been deducted.
| Issue | Possible Consequence |
| TDS not deducted or deducted late | Interest at 1% per month or part of a month from the date tax was deductible until it is deducted |
| TDS deducted but deposited late | Interest at 1.5% per month or part of a month from deduction until actual payment |
| Form 144 filed late | Late-filing fee of ₹200 per day, subject to the statutory limit |
| Wrong PAN or incorrect details | Tax-credit mismatch and correction may be required |
| Short deduction | Shortfall and applicable interest may need to be paid |
| TDS deducted but not deposited | Recovery and other statutory consequences may apply |
The ₹200-per-day amount is a late-filing fee, not interest. Under Section 427, the fee for delay in the relevant TDS statement cannot exceed the amount of tax deductible or collectible.
The 1% and 1.5% amounts are interest. Section 398 states that 1% applies from the date tax was deductible until deduction, while 1.5% applies from the date of deduction until actual payment.
Best Practices for NRI Landlords
Clear communication and good records can prevent many TDS problems. An NRI landlord should inform the tenant in writing about the landlord’s non-resident status and provide the correct PAN and other required tax details.
The landlord should keep the rental agreement, rent records, municipal-tax receipts, home-loan interest documents and TDS certificates. Tax credits should also be checked regularly instead of waiting until the income-tax return is filed.
Where normal withholding appears significantly higher than the likely final tax liability, the landlord can discuss whether a lower TDS certificate is appropriate. The application should be considered early because Form 128 needs to be dealt with before the relevant TDS transaction is completed.
NRIs who are planning to return to India should also review how a change in residential status can affect their tax, banking and financial position. This is a natural place to internally link to PrimeWealth’s RNOR status for returning NRIs and NRE and NRO accounts guides.
Section 195 vs Section 393: What Changed From April 2026?
The 2026 change is not limited to replacing Section 195 with Section 393. Several important forms and compliance references have also changed under the Income-tax Rules, 2026.
| Compliance Item | Up to 31 March 2026 | From 1 April 2026 |
| Governing law | Income-tax Act, 1961 | Income-tax Act, 2025 |
| Main provision for ordinary taxable payment to NRI | Section 195 | Section 393(2) |
| Lower/nil deduction provision | Section 197 | Section 395(1) |
| Lower/nil deduction application | Form 13 | Form 128 |
| Payer application for taxable proportion | Form 15E | Form 129 |
| Non-resident TDS statement | Form 27Q | Form 144 |
| Non-salary TDS certificate | Form 16A | Form 131 |
| Non-government TAN application | Form 49B(2) | Form 135 |
| Annual tax-information reporting | Legacy Form 26AS/AIS | Form 168 Annual Information Statement for TY 2026-27 |
The Income Tax Department’s official 2026 forms guidance confirms these form mappings. It also confirms that Form 168 corresponds to old Form 26AS under the new reporting framework.
Common Mistakes to Avoid
| Common Mistake | Better Approach |
| Treating an NRI landlord as a resident | Confirm residential status before calculating TDS |
| Using the resident-rent TDS rate | Apply the non-resident withholding provisions |
| Assuming ₹50,000 monthly rent is automatically exempt | Do not apply the resident threshold to Section 393(2) without a legal basis |
| Using the wrong PAN | Verify PAN and landlord details before filing |
| Not obtaining TAN where required | Complete TAN registration before regular NRI TDS compliance |
| Deducting TDS but depositing it late | Follow the applicable monthly deposit deadline |
| Missing Form 144 | File the quarterly non-resident TDS statement on time |
| Using Form 27Q/Form 16A for new-law transactions | Use Form 144/Form 131 for the applicable post-April 2026 framework |
| Assuming TDS equals final tax | Calculate house-property income and total tax separately |
| Using a lower rate without approval | Use the rate authorised under the proper lower-deduction process |
| Continuing to use Section 195 for new transactions | Use Section 393 for relevant events from 1 April 2026 |
These mistakes can usually be prevented by checking the landlord’s residential status and the applicable tax year before the first rent payment is processed. The tenant and landlord should also retain proper records so that any mismatch can be corrected more easily.
Conclusion
TDS on NRI rental income requires more care than rent paid to a resident landlord. The tenant should first confirm the landlord’s residential status and then apply the correct non-resident withholding provisions.
The major change from 1 April 2026 is the shift from the Income-tax Act, 1961 to the Income-tax Act, 2025. For relevant credits or payments from that date, ordinary taxable rent paid to an NRI is generally covered by Section 393(2) instead of the old Section 195 framework.
For ordinary rental income of an individual NRI, the base withholding rate is generally 30%, with applicable surcharge and 4% Health & Education Cess. However, the amount withheld by the tenant should not be confused with the landlord’s final income-tax liability.
The NRI’s taxable house-property income can be lower after considering eligible municipal taxes, the 30% deduction and qualifying interest on borrowed capital. Where normal withholding is much higher than the expected final tax, a lower or nil deduction certificate under Section 395(1) using Form 128 may be considered.
For the tenant, timely deduction, deposit, Form 144 filing and Form 131 issuance are important parts of compliance. For the NRI landlord, clear communication, proper documentation and regular checking of tax credits can help avoid many common problems.
Need Help With NRI Rental Income or Tax Planning?
Managing a rental property in India while living overseas can involve much more than collecting monthly rent. TDS, income-tax returns, property deductions, tax refunds, banking, and return-to-India planning can all affect the overall financial position.
PrimeWealth can help NRIs understand rental-income taxation, TDS planning, property-related financial decisions, return-to-India planning, and wider NRI financial planning. Where detailed tax filing or certification is required, the individual tax position should also be reviewed by a qualified tax professional.
Speak With PrimeWealth’s NRI Advisory Team
For broader financial planning, you can naturally link this CTA to PrimeWealth’s Financial Advisor for NRIs in India.
Disclaimer: The information in this article is provided for general educational and informational purposes only. It should not be considered tax, legal, accounting, or investment advice. Tax rules and their application may change and can vary depending on an individual’s residential status, income, property details, applicable tax regime, treaty provisions, and other circumstances.
Although PrimeWealth makes reasonable efforts to keep the information accurate and up to date, readers should verify the latest provisions, notifications, and compliance requirements before taking any action. For advice specific to your situation, please consult a qualified Chartered Accountant, tax professional, or legal advisor.
PrimeWealth does not guarantee any particular tax outcome, refund, lower TDS rate, investment result, or financial benefit based on the information provided in this article.
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