NRI tax · Income-tax Act 2025

Lower TDS Certificate for NRI Rental Income: Section 395 Step by Step

A tenant paying rent to an NRI must deduct about 31.2% as TDS, even if your actual tax on that rent is a fraction of that. You get the difference back as a refund after you file, which can mean waiting many months for money that was never tax. Section 395 lets you ask the tax department to authorise a lower rate in advance. This is how it works.

What Section 395 lets you do

Section 395(1) of the Income-tax Act 2025 says the payee (you) may apply to the Assessing Officer for deduction of tax at a lower rate, or no deduction. If the officer is satisfied that your total income justifies it, a certificate is issued, and the person paying you (your tenant) must deduct tax at the rate on the certificate, or nothing, for as long as it is valid. The old equivalent was Section 197.

Two different applications. Section 395(2) is a different tool: it lets the payer ask the officer to decide what proportion of a payment is chargeable to tax. That suits payments that are only partly taxable. Rent is fully taxable, so as an owner you want the payee application in Section 395(1).

When it is worth the effort

Rent	TDS at 31.2% over a year	If your estimated tax is ₹30,000	Cash tied up until refund
₹40,000 a month	₹1,49,760	₹30,000	About ₹1,19,760
₹60,000 a month	₹2,24,640	₹30,000	About ₹1,94,640
₹90,000 a month	₹3,36,960	₹30,000	About ₹3,06,960

The "estimated tax" column is illustrative only. At ₹40,000 a month with no other Indian income, the tax after the 30% deduction can be nil (NRIs get no resident-only rebate (Section 87A under the 1961 Act), but ₹3.36 lakh of taxable rent is below the ₹4 lakh slab under the new regime), so the whole ₹1,49,760 would wait for a refund. Your own number depends on your other Indian income, your deductions and the regime. The larger the gap between TDS and true liability, the more a certificate is worth; if your expected liability is close to 31.2% of the rent, there is little to gain.

How to apply

Estimate your tax for the year: gross annual rent, minus municipal taxes you pay, minus the standard deduction of 30% of the annual value (Section 22), minus interest on a home loan, plus any other Indian income.
Make sure you have a PAN and an e-filing account, and know your tenant's TAN (it must appear on the application, so ask for it).
Submit the application to the Assessing Officer through the Income Tax Department's portal. The application is reported as Form 128 (it replaced Form 13), filed online; confirm the current process on the portal.
Attach your income estimate, the rent agreement, your last returns, details of the home loan and any proof of other income. Officers vary in what they ask for.
On approval, send the certificate to your tenant. They must deduct at the certified rate and quote the certificate in their TDS statement.

Practical points

Apply early in the year. Certificates apply from the date stated, and a payer who has already deducted at the full rate for several months will not refund you; you must wait for your return.
One certificate per payer. Under the old Section 197 process, a certificate named the payer's TAN and a period. Expect the same under Section 395: a new tenant means a new certificate.
Renew annually. Certificates are time-limited and the officer may cancel one after giving you a chance to respond (Section 395(5)).
Keep filing. The certificate changes the deduction, not your duty to file a return.

What it does not change

A lower deduction certificate does not change what you owe in your home country; that depends on your residence country and the treaty. See the country-by-country DTAA guide. Nor does it replace the return you file in India. For the baseline TDS rule see TDS on rent paid to an NRI.

Where Rent Connect fits

Most of this is admin that someone has to remember every month. Rent Connect is a property management tool for owners who rent out property in India, currently in early access. It sends WhatsApp rent reminders, records each payment as pending, overdue or paid, and generates a rent receipt when a payment is marked paid. Tenant details, the agreement and maintenance issues (with photos) sit on one tenancy record, and a Deposit Ledger records the agreed deposit and any move-out deductions. The ledger is a shared record only: Rent Connect does not hold the money.

It does not file police intimations, compute or deposit TDS, or file tax returns for you. Those stay with you, your tenant and your CA. To follow the launch, join the waitlist.

How this page was checked

Figures here were compiled on 16 October 2026 from the sources below. Where we could not open an official page, the note at the end says so. Government portals and rates change, so confirm the live number or form with the office before you pay or file.

What we could not verify: The form number, documents and processing time under the new rules were not confirmed from an official source. The advice that certificates name the payer's TAN and a validity period is from the old Section 197 practice and is assumed to carry over.

Frequently asked questions

What is a lower TDS certificate?

A certificate from the Assessing Officer under Section 395 telling your tenant to deduct tax on your rent at a lower rate, or not at all, because your actual tax liability is lower than the standard rate.

Who applies, the NRI or the tenant?

The NRI owner (the payee) applies under Section 395(1). The payer-side application in Section 395(2) is a different tool for deciding what portion of a payment is taxable.

How long does it take?

We found no official timeline. Practice varies by officer, which is why applying early in the tax year matters.

Can the officer cancel the certificate?

Yes, after giving you a reasonable opportunity to be heard (Section 395(5)).

Do I still file a tax return?

Yes. The certificate changes the amount deducted at source, not your obligation to file.

General information, not tax advice. Procedures on the e-filing portal change; ask a chartered accountant to file the application.

Manage your Indian property from anywhere

WhatsApp rent reminders, a receipt for every paid month, tenant details and the agreement on one record, and a Deposit Ledger that records the deposit without holding it. Someone local still handles keys and repairs.

Join the waitlist