Provisions for TDS While Renting an NRI Property

According to Section 195 of the Income Tax Act, 1961, any individual residing in a property owned by a Non-Resident Indian (NRI), or any person/entity making rental or interest payments to an NRI or a foreign company, is mandatorily required to deduct TDS at the rate of 31.2% on the amount paid. The deducted TDS must be deposited with the government by the 7th day of the following calendar month.

Example

Mr. Vijay, an NRI, has let out his property to Ms. Sneha for a monthly rent of ₹40,000. As per Section 195, Ms. Sneha must deduct 31.2% TDS from the monthly rent before paying the landlord.

Therefore, the actual amount payable to Mr. Vijay is: ₹40,000 - (31.2% of ₹40,000) = ₹27,520.

The deducted TDS of ₹12,480 must be deposited with the Income Tax Department.

Tax Rates Applicable

The tax must be deducted from the rent payable at 31.2% (30% TDS + 4% cess on TDS). The above rate is applicable unless the NRI landlord has obtained a lower TDS certificate under Section 197. In such cases, the deductor must deduct TDS at the reduced rate specified in the Assessing Officer’s order.

How to Deduct Tax and File Returns?

1 First, tenants must get a tax account number (TAN) via the Protean Website.

2 Once the TAN number is issued, the tenant must deduct TDS at 31.2% through Challan ITNS 281 within the seventh day of the following calendar month.

3 The rest of the rent amount should be paid to the NRI property owner.

4 After the TDS is deposited, the tenant should furnish a quarterly TDS Return in Form 27Q.

5 The tenant must also issue a TDS certificate to the NRI landlord in Form 16A. This form can be downloaded from the TRACES website within 15 days of the due date of filing the return.

How to pay rent TDS using challan ITNS 281?

1 Navigate to the “e-Pay Tax” portal of the Income Tax Department on Website to make direct tax payments.

2 Log in with TAN

3 Select “Pay TDS under section 195 (code 195)”

4 TDS/TCS Payable by Taxpayer (200)

5 Other than Company Deductee - Income Tax (Other than Companies) (0021)

1 Go to the protean-tinpan website.

2 Navigate to the Downloads section menu bar, then select “e-TDS/e-TCS” then “quarterly returns” and then “regular” (for first-time filing).

3 Download the RPU software. In the RPU, choose Form 27Q and select “regular” again.

4 Input your TAN number, financial year, quarter, and personal information (including branch as 'none').

5 Add the TDS payment information from your challan (amount, BSR code, serial number, date of deposit).

6 Fill Deductee Details (Annexure 1), enter seller's information including PAN, payment details, and TDS deduction information.

7 Create & Validate File

Click 'create file'

Download the challan file (CSI) from the ITR portal.

Browse and select this file in RPU

Validate to generate the .fvu file

8 Upload & Submit

Log in to the income tax website with your TAN

Navigate to file Form 27Q

Attach the .fvu file

9 Complete e-verification using a Digital Signature Certificate or OTP.

Timelines and Due Dates

Monthly TDS Deduction

TDS on rent must be deducted monthly, from the total rent paid to the NRI landlord. The deducted amount should be deposited by the 7th day of the following month.

Quarterly Returns

A quarterly TDS return in Form 27Q must be filed, detailing the TDS deductions made during the quarter. For example, you must file returns by 31st July 2025 for the TDS on rent paid for April, May, and June 2025.

Annual TDS Certificate

An annual TDS certificate in Form 16A should be generated from the TRACES portal within 15 days of the due date for furnishing TDS returns and must be provided to the NRI landlord.

Penalty for not paying TDS

If the tenant fails to deposit the TDS to the government within the specified time, i.e., by the 7th of the following month, it attracts prosecution under Section 276B of the Income Tax Act, 1961. This may lead to imprisonment for a period ranging from 3 months to 7 years.

In cases where the tenant entirely neglects to deduct TDS from the rent paid to the NRI landlord, Section 271C of the Income Tax Act imposes a penalty equivalent to the amount of TDS that should have been deducted. Additionally, interest charges will also apply for delayed deduction or deposit of TDS

When should I deposit the TDS amount?

The deducted TDS must be deposited on or before the 7th of the following month using challan ITNS 281.

What forms are involved in TDS compliance?

Challan ITNS 281 - For depositing TDS monthly. Form 27Q - Quarterly TDS return for payments to NRIs. Form 16A - TDS certificate to be issued to the NRI landlord - once per year.

Who needs to deduct TDS on rent paid to NRIs?

Any resident individual, tenant, or business entity who pays rent to an NRI property owner is legally required to deduct TDS at 31.2% before transferring the rent. This needs to be done at the time of every rental payment and for any rent amount (no minimum).

What are the penalties for late or non-payment of TDS?

Late deposit of TDS can lead to imprisonment (3 months to 7 years) under Section 276B. Failure to deduct TDS can attract a penalty equal to the TDS amount under Section 271C. Additionally, interest charges will also apply for delayed deduction or deposit of TDS.