Section 195 TDS on Rent Paid to NRI Landlords: Complete Guide for FY 2024-25

If you are an NRI with a property rented out in India, there is a tax obligation your tenant almost certainly does not know about — and that ignorance can land both of you in trouble.

Under Section 195 of the Income Tax Act, any person paying rent to a non-resident is legally required to deduct TDS before handing over the money. The rate is steep (up to 31.2%), the compliance form is different from what most tenants file, and the consequences of non-deduction are serious.

This guide explains everything — for both the NRI landlord trying to understand what's happening to their rent, and for the tenant who suddenly realises they've been paying without deducting.

Calculate it now: Use our free Section 195 TDS Calculator — enter your monthly rent and see exactly how much your tenant should be deducting, including surcharge and cess.

RealAssist tip: NRIs can use RealAssist to compute their rental income, verify TDS credits, and generate a complete Schedule HP summary — all without visiting India. Start free →

Who Does Section 195 Apply To?¶

Section 195 applies whenever a resident payer makes any payment (including rent) to a non-resident. The resident is called the "deductor" and is responsible for:

1. Deducting TDS at the applicable rate
2. Depositing it with the government within 7 days of the month-end
3. Filing Form 27Q (quarterly return for non-resident payments)
4. Issuing Form 16A (TDS certificate) to the NRI landlord

This is different from Section 194-IB, which applies to resident landlords and charges a flat 5% TDS on rent above ₹50,000/month.

Section 195 TDS Rate on Rent to NRI¶

For rental income paid to an NRI, TDS under Section 195 is deducted on the gross rent at the following rates for FY 2024-25:

Important: Unlike Section 194-IB (which applies only if rent > ₹50,000/month), Section 195 applies to every rupee of rent regardless of amount. There is no minimum threshold.

*UAE does not have a comprehensive DTAA with India for income tax on individuals. UAE-based NRIs generally cannot claim DTAA benefit on rental income.

How TDS Is Calculated — A Worked Example¶

Suppose your tenant pays ₹40,000/month rent (₹4,80,000/year).

Without DTAA benefit:

Your tenant should deduct ₹12,480/month (= ₹1,49,760 ÷ 12) and pay you only ₹27,520 each month.

Section 195 vs Section 194-IB: Key Differences¶

The most common mistake tenants make: they file Form 26QB (the resident landlord form) instead of Form 27Q. If this happens, the TDS credit will not appear on the NRI's Form 26AS and the filing becomes a nightmare to unwind.

What the Tenant (Deductor) Must Do¶

If you are a tenant renting from an NRI landlord, here is your compliance checklist:

Every month:
- [ ] Deduct TDS at 31.2% (or applicable DTAA rate) from the rent before payment
- [ ] Deposit the TDS by the 7th of the following month using Challan ITNS 281

Every quarter (by 15th of month after quarter-end):
- [ ] File Form 27Q (TDS return for non-resident payments)
- [ ] Quote the NRI landlord's PAN correctly

After filing:
- [ ] Download and share Form 16A with the landlord — they need this to claim credit

Penalty for non-deduction:
The tenant becomes an "assessee in default". The Income Tax Department can:
- Treat the entire rent as disallowed expense (tenant loses the deduction)
- Levy interest @ 1% per month from the date TDS was deductible
- Charge a penalty equal to the TDS amount under Section 271C

What the NRI Landlord Must Do¶

As the NRI landlord, you are not responsible for deducting TDS — that is your tenant's job. But you have responsibilities of your own:

1. Provide Your PAN to the Tenant¶

Without your Indian PAN, your tenant must deduct TDS at 20% instead of 30% — but also cannot file Form 27Q correctly, meaning the credit may not reflect on your Form 26AS. If you don't have a PAN, apply for one immediately.

2. Apply for a Lower Deduction Certificate (Section 197)¶

If your actual tax liability is lower than 31.2% (for example, because of Section 24 deductions reducing your taxable income), you can apply to the Assessing Officer for a Certificate under Section 197. Once issued, your tenant can deduct TDS at the reduced rate.

This is especially useful for NRIs whose effective tax after deductions is 10–15%.

3. File Your ITR to Claim a Refund¶

Here is the good news: TDS under Section 195 is just a prepayment of tax. When you file your ITR, you:

1. Report the gross rent under Schedule HP
2. Claim Section 24(a) standard deduction (30% of NAV)
3. Claim Section 24(b) home loan interest (if applicable)
4. Declare TDS deducted by tenant (from Form 26AS / AIS)
5. Pay only the balance tax — or claim a refund if TDS exceeds your actual liability

Many NRI landlords with home loans get a substantial refund because the 30% TDS was deducted on gross rent, but their net taxable income after deductions is much lower.

Use our free Schedule HP Calculator to compute your NAV and exact Section 24 deductions before filing.

DTAA Benefits for NRI Landlords¶

India has Double Taxation Avoidance Agreements (DTAA) with 90+ countries. If you are a tax resident in one of these countries, you may be able to:

• Pay TDS at a lower rate (e.g., 15% for UK residents under the India-UK DTAA instead of 30%)
• Avoid being taxed twice on the same rental income — once in India and once in your country of residence

To claim DTAA benefit, you need:
1. Tax Residency Certificate (TRC) issued by your country of residence
2. Form 10F filed with the Indian Income Tax Department
3. Provide both documents to your tenant so they can apply the DTAA rate

Common DTAA rental income rates:

*Gulf-based NRIs do not generally benefit from DTAA on rental income.

How to Verify TDS Was Actually Deposited¶

This is where many NRI landlords get caught out. Your tenant may promise to deduct and deposit TDS — but never actually do it. You find out only at ITR filing time when the credit is missing.

Check your Form 26AS / AIS regularly:

1. Log in to the Income Tax Portal
2. Go to e-File → Income Tax Returns → View Form 26AS
3. Look for entries under Part A1 (TDS on non-salary payments)
4. Cross-check the TAN of the deductor (your tenant's employer or the tenant themselves)

If the credit is missing, contact your tenant immediately and ask them to:
- Check if they filed Form 27Q (not 26QB)
- Verify the correct PAN was quoted
- Confirm the challan was deposited

Filing ITR as an NRI with Rental Income¶

NRIs with rental income in India must file ITR-2 (or ITR-3 if they also have business income). The relevant schedules are:

• Schedule HP — House Property income calculation
• Schedule SI — Special rate income (rental income is taxed at slab rates for residents; for NRIs it may be at flat 30%)
• Schedule TR — Tax relief claimed under DTAA
• Schedule FSI — Foreign source income (if any)
• Part B TT — Total tax payable / refund due

Key filing details for NRIs:
- Residential status: Select NRI (Non-Resident)
- Bank account: You can provide your NRE/NRO account for refund credit
- Filing deadline: 31 July (same as residents; 31 October if audit required)
- Can file from abroad: Yes — everything is online via the Income Tax Portal

Common Mistakes to Avoid¶

NRI landlords:
- ❌ Not sharing PAN with tenant → tenant cannot file correctly
- ❌ Assuming tenant is deducting TDS without verifying Form 26AS
- ❌ Not applying for Section 197 lower deduction certificate when eligible
- ❌ Forgetting to file ITR to claim TDS refund

Tenants renting from NRIs:
- ❌ Filing Form 26QB instead of Form 27Q
- ❌ Deducting TDS on net rent instead of gross rent
- ❌ Not depositing TDS on time (interest of 1.5%/month kicks in)
- ❌ Not issuing Form 16A to the landlord

How RealAssist Helps NRI Landlords¶

Managing rental income from abroad is genuinely hard — different time zones, unfamiliar portals, a compliance chain that depends on your tenant doing the right thing. RealAssist is built specifically for this scenario:

• Automated rent tracking — know every payment received and verify it against your expected rental schedule
• TDS credit reconciliation — we flag when TDS on Form 26AS doesn't match what your tenant should have deducted
• Schedule HP computation — enter your rent, loan details, and municipal tax; we calculate your exact taxable income
• ITR-ready summary — download a formatted summary you or your CA can plug directly into ITR-2
• From anywhere — log in from London, Dubai, Toronto or Sydney; no India visit required

Start for free → · Read how Schedule HP works →