NRI Rental Income TDS in 2026: Why Your Tenant Is the One Who Can Get You in Trouble

The message arrived on a Sunday night, which is usually a sign something has gone wrong. Our client — a consultant in Manchester who lets out a two-bedroom flat in Bengaluru — had just had a tense call with his tenant. "He says his accountant told him that because I live in the UK, he should have been deducting tax from my rent all along, at some scary rate, and now he's worried he's in trouble. He's talking about leaving. Is this real?"

It is entirely real, and it is one of the most under-known rules in the whole of NRI property letting. When a tenant pays rent to a resident landlord, the deduction (if any) is gentle. When the landlord is an NRI, the rent falls under a completely different section of the Income-tax Act — Section 195 — and the default deduction is dramatically higher. The uncomfortable part: almost no ordinary tenant knows this, the duty to deduct sits with them, and yet the person who ends up exposed, over-deducted, or chasing a refund is usually you, the landlord sitting in the UK.

This post is the honest, practical walk-through we give every NRI landlord. It is general information, not tax advice — once the numbers get large, this is firmly chartered-accountant territory. What we do at NriDirect is the unglamorous foundation beneath all of it: making sure your PAN status and paperwork are correct, so the tenant's deduction attaches to you cleanly and so you can actually reclaim any excess later. Get that wrong and even a willing tenant cannot pay you properly.

This is also a different problem from selling. If you are disposing of the property rather than letting it, the deduction rules and the capital-gains maths are another story altogether — our companion guide to NRI property sale TDS, PAN and TAN covers that. This post is purely about rental income.

Why rent to an NRI is taxed so differently#

When rent is paid to a resident landlord, the tenant either deducts nothing (below the threshold) or a small percentage under the resident provisions. That is the world most tenants — and most lawyers and accountants — have in their heads.

The moment the landlord is a non-resident, the rules switch tracks. Rent paid to an NRI is a payment to a non-resident, which brings it under Section 195. And Section 195 does not carry the gentle resident rate. By default, TDS on rent to an NRI lands at around 30 percent plus applicable surcharge and cess — a figure we present as indicative for 2026, because surcharge layers and cess shift, and you should confirm the precise position against the official portal.

That is not a typo and it is not a penalty. It is simply the default the system applies to a non-resident's Indian income, because the tax authority has no visibility of your wider position and deducts conservatively until you prove you qualify for less.

Here is the contrast that motivates getting the paperwork right.

The honest part: the tenant carries the duty, but you carry the risk#

Here is the structural unfairness at the heart of this. The legal obligation to deduct rests on the tenant. They are the one who, in theory, should apply for a TAN, deduct the right amount, deposit it, file the return and issue you a certificate. In practice, the overwhelming majority of tenants paying an individual NRI landlord have never heard of any of this. They pay the full rent into your account every month, deduct nothing, and assume — quite reasonably — that tax is your problem, not theirs.

When this surfaces — often because the tenant changes accountants, or you sell, or a return throws up a mismatch — the consequences split awkwardly:

• The tenant can be treated as in default for failing to deduct, exposing them to interest and possible penalties on the tax that should have been withheld. That is precisely the fear that makes a good tenant suddenly talk about leaving.
• You, the landlord, still owe tax on that rental income regardless. The rent did not become tax-free because nobody deducted it; you simply have to account for it through your Indian return instead.

So the rule that looks like "the tenant's problem" quietly becomes a shared problem, and the disruption — a spooked tenant, a stalled tenancy, an awkward back-conversation — lands squarely on the landlord in the UK.

What a tenant actually has to do — and why it scares them#

When a conscientious tenant (or their accountant) does realise the landlord is an NRI, the to-do list they face is genuinely off-putting for an ordinary individual:

• Obtain a TAN — a Tax Deduction and Collection Account Number, separate from their PAN.
• Deduct the TDS at the non-resident rate each time rent is paid.
• Deposit the deducted tax to the government.
• File a Form 27Q return reporting the deduction.
• Issue you a Form 16A certificate showing the tax withheld, which is your evidence to claim the credit.
• Where rent is remitted abroad, deal with Form 15CA and a chartered accountant's Form 15CB.

For a corporate tenant with a payroll department, this is routine. For an individual renting a flat to live in, it is alien, intimidating paperwork — exactly the kind of thing that makes a tenant wonder whether a resident-owned property would have been simpler. That reaction is understandable, and as the landlord it is in your interest to make the process as painless as you reasonably can for a cooperative tenant.

Your real lever: the lower or nil-deduction certificate#

Thirty percent of gross rent is almost always far more than your actual tax on that rent. That is because, when you compute your real liability, you get to subtract some meaningful deductions that the flat 30 percent at source completely ignores:

• The standard deduction of 30 percent of the annual value (after municipal taxes) — a flat allowance against rental income, not to be confused with the TDS rate that happens to share a number.
• Municipal taxes actually paid.
• Home-loan interest, where the let property is mortgaged, which for many landlords wipes out a large slice of the taxable rent.

Because the deduction at source ignores all of that, the cash withheld from you is often wildly more than you truly owe. The fix is the same one that property sellers use: a lower or nil-deduction certificate, applied for by you under Section 197 using Form 13, and granted by your Assessing Officer. If issued, it instructs the tenant to deduct at a reduced rate that reflects your real position — so your monthly cash flow is not throttled to begin with.

The alternative, if you do not get a certificate, is to let the tenant deduct the full amount and then reclaim the excess by filing an Indian income-tax return. That works, but it means your money sits with the tax department for the best part of a year before it comes back. Our guide to the NRI income-tax return in India walks through who needs to file and how the refund route works.

Getting the rent out of India#

Collecting rent is only half the job for most UK landlords; you also want it in your hands in sterling. Indian rental income is generally received into an NRO account, which is the account type designed for income arising in India. From there, you repatriate.

The standard route is an NRO-to-NRE transfer, which sits within the broad limit of around US$1 million per financial year for eligible balances. Crucially, the bank will not simply wire the money out on your say-so — it wants the tax paperwork in order first. That means Form 15CA (your declaration) and, in most cases, a chartered accountant's Form 15CB certifying that the appropriate tax has been dealt with before the remittance.

After the standard 30 percent deduction, municipal taxes and any home-loan interest, your post-tax rent is ordinarily repatriable — but only once the bank is satisfied the tax position is clean. The full mechanics of remitting funds out of India, including the 15CA/15CB pairing, are covered in our dedicated guide to repatriating money from India with Form 15CA and 15CB.

Why your own PAN is, again, step zero#

You will have noticed a recurring theme. Whether it is the tenant's deduction, the Form 16A credit, the lower-TDS certificate or the repatriation paperwork, every single thread runs back through one document: your PAN.

The tenant deposits the TDS against your PAN. If you do not hold a valid PAN, or it shows the wrong status, the problems are all yours:

• The TDS credit cannot attach cleanly to you, so claiming it — or a refund — at return time becomes a fight.
• A Form 13 lower-TDS application is filed on your PAN; no PAN, no certificate, no relief from the gross-rent deduction.
• A PAN flagged inoperative, or still listing you as Resident when you are actually an NRI, can trigger a higher deduction and refund delays — and your tenant's Form 27Q can throw up mismatches.

NRIs and OCIs are generally exempt from PAN-Aadhaar linking, but the income-tax database can still carry stale Resident status from years ago — the kind of quiet mismatch that surfaces at the worst possible moment, mid-tenancy, with a nervous tenant watching. (Note, in passing, that none of this turns an OCI into something more: OCI is not dual citizenship, it carries no voting rights and no claim on agricultural land — it does not change how your rental income is taxed.) Getting a correctly-issued PAN that shows Non-Resident status is the foundation the whole let rests on, which is why we treat the NRI PAN card service as step zero of every rental conversation.

DIY or get help — the honest call#

We will be straight, because the answer genuinely splits.

Where DIY works well: if you already hold a valid PAN with correct Non-Resident status, you have a single straightforward let, and a cooperative tenant willing to obtain a TAN and file Form 27Q, much of the routine running is manageable from the UK. Plenty of organised landlords handle the monthly mechanics themselves.

Where it earns its fee: the lower-TDS certificate, the Form 15CB certification, computing your taxable rent across deductions and home-loan interest, and filing the Indian return to reclaim excess TDS are firmly chartered-accountant territory. A good CA in India is worth far more than they charge on a recurring rental relationship, and we will tell you so rather than pretend otherwise.

Where we fit: NriDirect's lane is the identity layer — making sure your PAN exists, is operative, and shows Non-Resident status before any of that begins. Get that wrong and even the best CA, and the most willing tenant, are blocked. If your PAN is missing, dormant, or wrongly flagged, that is the problem we fix every week, and it is almost always the right first move.

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Our Manchester client's tenancy, for the record, survived. We had sorted his PAN months earlier, so when the tenant's accountant raised the alarm, the path forward was clear: yes, the rent should be deducted under Section 195; here is the landlord's correct Non-Resident PAN so your Form 27Q attaches properly; and a lower-TDS certificate is being applied for so the deduction is fair rather than punishing. The tenant, reassured he was not being left to drown in unfamiliar paperwork, stayed. The rule that nearly cost a good tenancy turned out to be entirely manageable once the foundations were right.

If your only loose end before you let — or before you fix a tenancy that has been running without TDS — is whether your PAN is correct and operative, that is exactly the kind of thing we sort quickly and properly, so the rest of the process, tenant and all, can actually work the way it is meant to.

This guide reflects TDS on rental income paid to NRI landlords and the related PAN, certificate and repatriation rules as observed by NriDirect in 2026. TDS rates, surcharge and cess, the standard deduction, the US$1 million repatriation limit, thresholds and procedures are approximate, are drawn in part from secondary sources, and change without notice; your position depends on your individual circumstances — verify current details with the Income Tax Department of India↗ and always consult a qualified chartered accountant or tax professional before acting. NriDirect is an independent UK agent that assists only with PAN and consular paperwork, and is not affiliated with the Income Tax Department or any Indian government body.