NRI's to Rent Out Property in India

NRIs Guide to Renting Out Property in India

NRIs renting property in India is not an uncommon sight. Whether it is by means of a home loan or property inheritance for NRIs in India, as an NRI, you are eligible to rent out any of your properties in India. Not only is this considered a safe investment, but the rent paid to the NRI landlord is also a valuable addition to your monthly earnings while growing your capital investment in the property. As per the current inheritance rules, property inheritance for NRIs in India is allowed. Not only that, an inherited property can either be sold or rented out to tenants in India as well. The rent paid to NRI landlord is can be deposited in either an NRE account or NRO account, provided you comply with all the other rules and regulations regarding repatriation. Thus, NRIs renting property in India are making a smart move. We have carefully curated for you, a complete guide for NRIs renting property in India, which will give you all the information you will need to get started on your property.

Can An NRI Earn Rental Income From India?

Yes, an NRI can definitely earn rental income from any of his/her properties in India. The rental income can either be deposited in your NRO or NRE account. Generally, this amount can be freely repatriated to your country of residence. In case you would like the amount to be directly transferred to your country of residence, this too is possible. But for this amount to be remitted directly to you, you would have to get a certificate from a chartered accountant stating that all your taxes have been duly paid in India.

Can Your Rental Income Be Taxed In India?

Even if you are an NRI, income generated in India is taxable in India, provided it falls within the range of taxable income. Tax should be deducted at the source by the payer of the rent. Your tenant should obtain a TAN number and deduct TDS at 30 percent from the total amount paid. In case your tenant has not been deducting tax at the source, it would be prudent for you to file your tax returns and pay the requisite amount.

Can Your Rental Income Be Taxed In Your Country Of Residence?

As an NRI, you must be paying taxes in your country of residence as well. Whether your income from India is taxable in the country of your residence depends on the taxation laws of the country. Several countries take up global income in order to find your taxable income, in which case, your rental income from India could be taxed in your country of residence. If this is the case, you can look at the Double Taxation Avoidance Agreements (DTAA) to determine what kind of tax breaks you can get in your country of residence. For example, as per the US-India DTAA, you will have to declare your rental income from India in the US. Since this amount is taxable in India, you will get a tax credit in the US for the tax paid in India.

What is Deemed Rental Income?

To understand what deemed rental income is, we have to go back to the Indian Income Tax Act. This Act states that if a person (whether a resident or an NRI) owns only one property, it will be considered self-occupied. There will be no tax on a self-occupied property. If you own more than one property, the properties that are not considered self-occupied will be deemed to be given on rent, irrespective of whether you have given it for rent or not. In the event that you have not given a property for rent, you will have to calculate the deemed rental income on your property and pay the taxes due.

But there is a catch. The Indian Income Tax Act does not specify whether the properties you own are in India or abroad. At the time of drafting the Act, it seemed far-fetched that Indians would own property abroad. But this is increasingly true of many NRIs staying abroad. So the global properties owned by you would be taken into consideration for this. For example, if you own only one property globally that is situated in India, then you will not have to pay any tax on the deemed rental income of the property. But, if you own a property in your country of residence as well one property in India, then you will be required to pay taxes on the deemed rental income of the property. Remember that this rule also applies to inherited property.

This is all the information NRIs renting property in India would need. Whether it is rent paid to NRI landlord or the current taxation rates, you now know what you will need to do in order to rent your property in India. Further, you can look up more details on the rules for property inheritance for NRIs in India, and the rules for repatriating your earned income in India depending upon the kind of bank account you choose to open.