TDS ON RENT PAYMENT TO NRI : NEW INCOME TAX RULES 2026
TDS ON RENT PAYMENT TO NRI : NEW INCOME TAX RULES 2026
Under the Income-tax Act, 2025, rent payments made to a Non-Resident Indian (NRI) for property located in India are subject to strict Tax Deducted at Source (TDS) regulations. Rent from property situated in India is legally deemed to accrue or arise in India under Section 9(2)(b), making it taxable in India.
Here are all the comprehensive points regarding TDS on rent payments to an NRI:
1. Applicability (Who must deduct TDS)
The obligation to deduct TDS on rent paid to a non-resident falls on “Any person” making the payment. Furthermore, this obligation is absolute—it extends to the payer even if the payer is also a non-resident and does not have a residence, place of business, or any presence in India.
2. Section and Rate of TDS on Rent Paid to NRI
Unlike rent paid to residents (which has specific defined rates and thresholds), rent paid to an NRI falls under the residual category for non-residents: Section 393(2) (Table: Sl. No. 17) for “any other sum chargeable under the provisions of this Act”.
- The Rate: The tax must be deducted at the “Rates in force” applicable to the specific tax year.
- No Threshold: Unlike the ₹50,000 per month threshold that applies to rent payments to residents, the Act does not specify a basic exemption threshold for withholding tax on payments to non-residents under this clause.
Under the Income-tax Act, 2025, as amended by the Finance Act, 2026, the TDS rate on rent paid to a Non-Resident Indian (NRI) is 30% (plus applicable surcharge and cess).
Here is the step-by-step breakdown based on the updated 2026 rules:
A. The Governing Section (“Rates in force”) As discussed previously, rent paid to an NRI does not have a specific named rate in the primary TDS tables but falls under the residual category for non-residents under Section 393(2) [Table: Sl. No. 17]. The law mandates that tax for this section must be deducted at the “rates in force”.
B. The 30% Base Rate The “rates in force” for the current tax year are prescribed in Part II of the First Schedule of the Finance Act, 2026. For a payee who is a “person other than a company” and is a “non-resident Indian”, rent does not fall under specialized categories like capital gains, royalties, or interest. Therefore, it is taxed under the residual clause “on the whole of the other income”, which specifies a flat base rate of 30%.
C. Applicable Surcharge The base 30% TDS rate must be increased by a surcharge if the total income paid or likely to be paid to the NRI during the year exceeds certain high-value thresholds. The surcharge rates for an individual NRI are:
- 10% if the aggregate income paid exceeds ₹ 50,00,000 but does not exceed ₹ 1,00,00,000.
- 15% if the aggregate income paid exceeds ₹ 1,00,00,000 but does not exceed ₹ 2,00,00,000.
- 25% if the aggregate income paid exceeds ₹ 2,00,00,000 but does not exceed ₹ 5,00,00,000.
- 37% if the aggregate income paid exceeds ₹ 5,00,00,000.
Health and Education Cess for TDS on Rent paid to NRI
Under the Finance Act, 2026, the calculated income-tax and applicable surcharge must be further increased by an additional surcharge called the “Health and Education Cess on income-tax”, which is calculated at a flat rate of 4%. This cess is applied on the aggregate amount of the base tax and the surcharge.
When we factor in the 30% base rate, the varying surcharge slabs, and the mandatory 4% Health and Education Cess, here are the final effective TDS rates you must deduct on rent payments to an NRI:
- For total income up to ₹ 50,00,000:
- Base Rate: 30%
- Surcharge: 0%
- Health & Education Cess (4% of Base + Surcharge): 1.2%
- Effective TDS Rate: 31.2%
- For total income exceeding ₹ 50,00,000 but not exceeding ₹ 1,00,00,000:
- Base Rate: 30%
- Surcharge: 10%
- Health & Education Cess (4% of Base + Surcharge): 1.32%
- Effective TDS Rate: 34.32%
- For total income exceeding ₹ 1,00,00,000 but not exceeding ₹ 2,00,00,000:
- Base Rate: 30%
- Surcharge: 15%
- Health & Education Cess (4% of Base + Surcharge): 1.38%
- Effective TDS Rate: 35.88%
- For total income exceeding ₹ 2,00,00,000 but not exceeding ₹ 5,00,00,000:
- Base Rate: 30%
- Surcharge: 25%
- Health & Education Cess (4% of Base + Surcharge): 1.5%
- Effective TDS Rate: 39.0%
- For total income exceeding ₹ 5,00,00,000:
- Base Rate: 30%
- Surcharge: 37%
- Health & Education Cess (4% of Base + Surcharge): 1.644%
- Effective TDS Rate: 42.744%
D. The PAN Rule Check While Section 397 states that failure to furnish a valid PAN attracts a TDS rate of 20% or the rate in force (whichever is higher), in this case, since the prevailing rate in force for rent to an NRI is already 30%, the deduction will happen at 30% Plus Surcharge and Cess even if the PAN is missing.
Section Code for Payment of TDS on Rent to NRI
Under the Income-tax Act, 2025, there is no separate dedicated TDS section exclusively for rent paid to a Non-Resident Indian (NRI). Instead, it falls under the broad legal provision for taxable payments made to non-residents (which replaces the old Section 195).
You must deduct the tax under Section 393(2) [Table: Sl. No. 17], which explicitly covers “any other sum chargeable under the provisions of this Act, not being income chargeable under the head ‘Salaries'”.
When depositing the tax and filing your quarterly TDS statement for non-resident deductees (Form No 144), you must use the following codes:
- TDS Section Code: 1057.
- Nature of Income: Within the return, you must classify the transaction by selecting the specific nature of income as “Income by way of renting or leasing or letting out any real estate asset”.
(Note: If you are making a foreign remittance for this rent and filing Form No 145, the specific nature of remittance codes are 23 for “Income from Immoveable Property” or 29 for general “Lease Payment”).
3. Consequence of Not Furnishing a PAN
If the NRI landlord fails to furnish a valid Permanent Account Number (PAN) to the tenant (the deductor), the TDS rate will be substantially higher. Under Section 397(2)(b)(i), the tax must be deducted at the higher of the rates in force or a flat 20%.
4. DTAA Benefits and Tax Residency Certificate (TRC)
If a Double Taxation Avoidance Agreement (DTAA) exists between India and the NRI’s country of residence, the NRI may be eligible for a lower tax rate.
- To apply the lower treaty rate, the NRI must furnish a Tax Residency Certificate (TRC) obtained from the government of their residing country, along with other prescribed documents under Section 159(8).
- If the DTAA applies and the TRC is provided, tax can be deducted at the treaty rate if it is lower than the standard rate.
5. Option for Lower or Nil Deduction Certificate
If the NRI landlord believes their total overall income justifies a lower tax liability or no tax liability at all, the payer (tenant) or the payee (NRI) can make an application to the Assessing Officer under Section 395(1) or 395(2) to obtain a formal certificate allowing tax deduction at a lower rate, or no deduction at all.
6. Grossing Up the Rent
As discussed previously, if you (the tenant) enter into an agreement with the NRI landlord where you agree to pay a “net” rent amount and bear the burden of the TDS yourself, you cannot simply calculate the tax on the net amount. You must “gross up” the rent amount under Section 393(10) to determine the actual legally recognized income before deducting and depositing the tax.
7. Mandatory Reporting and Forms
When paying rent to an NRI, the payer must comply with specific reporting requirements:
- Form 144: The payer must file this quarterly TDS statement specifically used to report payments (other than salary) made to non-residents.
- Form 145: The remitter must furnish information detailing the remittance. “Income by way of renting or leasing or letting out any real estate asset” is a specific reporting category for this form.
- Form 146: If the taxable rent remittance exceeds ₹ 5,00,000 during the tax year and the Assessing Officer has not issued a lower/nil deduction certificate, an accountant’s certificate in Form No. 146 must also be obtained and submitted.
Related Post
Section 393 Income Tax Act 2025 Tax to be deducted at source.
Section 395 Income Tax Act 2025 Certificates.
How to File Form 145 Income Tax for Payment to NRI
Section 397 Income Tax Act 2025 Compliance and reporting.
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