Indian citizens are required to deduct tax from rent paid to landlords under certain conditions, deposit it to the PAN, and provide a form to the property manager detailing the tax deducted and rent paid. Non-resident Indians (NRIs) invest in properties in India and lease them out. Does the same rule apply to rent paid for properties owned by NRIs?
Who can be considered as NRI?
An individual who is of Indian origin or a citizen of India but not residing in India is considered an NRI. The determination of residential status is based on Section 6. According to this section, an individual is considered a resident of India if they meet any of the following criteria:
1. They have resided in India for at least 182 days during the previous year.
2. They have resided in India for at least 60 days during the previous year and for at least 365 days during the four immediately preceding years.
TDS Regulations for Renting Property Owned by an NRI
In 2024, updates have been made to the regulations concerning tax deduction at source for rent paid in India. Tenants renting properties owned by NRIs are now required to deduct 30% tax at source and submit the total amount to the tax authorities. Following the payment, tenants must fill out Form 15CA and electronically submit it to the income tax department. In this situation, TDS is mandatory for the rent paid, regardless of the amount payable.
Conclusion
TDS deduction on rental property owned by NRIs is a vital aspect of the Indian tax system, ensuring tax compliance and transparency in rental transactions. By understanding the importance, procedures, implications, and recent updates related to TDS deduction, tenants and NRIs can navigate rental agreements with confidence and adherence to tax laws. Compliance with TDS regulations not only fosters trust and fairness but also contributes to a smoother rental experience for all parties involved.
