NRI tax · Income-tax Act 2025

TDS on Rent Paid to an NRI: Section 393 of the Income-tax Act 2025 (Tax Year 2026-27)

From 1 April 2026 the Income-tax Act 2025 replaced the 1961 Act, and the TDS rules your tenant follows moved from Section 195 to Section 393. The rate for rent paid to an NRI did not fall, but the section numbers, forms and some mechanics changed, and most guides still describe the old law. This page reads the new section against the official text.

What changed on 1 April 2026

The Income-tax Act, 2025 consolidates tax deduction at source into Section 393. Sub-section (1) has tables for payments to residents, sub-section (2) a table for payments to non-residents, and sub-section (3) a table for payments to anyone. Rent paid before 1 April 2026 stays with the 1961 Act (Section 195 for NRIs); rent paid or credited from that date falls under the new section. If your tenant or your CA still talks about "Section 195", they are describing the old law.

Where rent to an NRI sits in Section 393

The non-resident table in Section 393(2) does not list rent by name. Rent paid to an NRI falls under serial number 17: "any interest ... or any other sum chargeable under the provisions of this Act, not being income chargeable under the head Salaries", paid by any person to a non-resident individual or a foreign company, at "rates in force". There is no threshold: tax is deducted on every payment, at the time of credit or payment, whichever is earlier. Note 3 to that serial number says the duty applies whether or not the NRI has any presence in India.

"Rates in force" means the rate in the Finance Act for non-resident individuals: 30% on this income, plus 4% health and education cess on the tax, which gives 31.2% as the effective rate. Surcharge applies only if the rent paid or likely to be paid to you in the year exceeds the Finance Act threshold (reported as ₹50 lakh for the first 10% slab), which is rare for a residential let.

Resident and NRI rent TDS compared

	Rent to a resident (Section 393(1))	Rent to an NRI (Section 393(2))
Payer is an individual or HUF (not required to audit)	2%, only if rent is above ₹50,000 for a month or part of a month, deducted once for the last month of the tenancy or tax year (Note 1)	Applies to every payment, no threshold
Payer is a company, firm or other "specified person"	2% for plant and machinery; 10% for land, buildings and furniture; above ₹50,000 a month	Same rule as above
Rate	2% or 10%	Rates in force: 30% plus 4% cess, 31.2% effective
When deducted	Individual or HUF payer: once, for the last month of the tenancy or tax year. Company or firm payer: at credit or payment, whichever is earlier	At credit or payment, whichever is earlier, on each rent payment

What your tenant has to do

Obtain a TAN (tax deduction account number). A resident individual tenant who only pays rent to another resident needs none; one who pays an NRI does.
Deduct tax at the rate above from every rent payment, and deposit it with the government under their TAN, quoting your PAN so that the credit reaches you.
File the periodic TDS statement for payments to non-residents. Under the 1961 Act this was Form 27Q; secondary sources report it renumbered as Form 144 from April 2026. Confirm the current form on the TDS portal.
Issue a TDS certificate to you under Section 395(4). Under the old Act this was Form 16A.

If the tenant has never deducted TDS. Many do not know the rule. A tenant who fails to deduct can be treated as in default and charged interest and penalty. Raise it now, start deducting from the next payment, and ask your CA how to deal with earlier months. Do not agree to a "net" rent without reading the next section.

If you agree a "net" rent, the maths changes

Section 393(10) says that where the payer has agreed to bear the tax, the income is grossed up so that after deduction the payee receives the agreed net amount. If your agreement says you must receive ₹70,000 after tax, TDS is worked out on a grossed-up rent of about ₹1,01,744 (₹70,000 ÷ 0.688), so the tenant deposits roughly ₹31,744 and effectively pays ₹1,01,744 for the flat. Many tenants agree to "net" rent without realising this.

A worked example

Rent ₹60,000 a month. TDS at 31.2% is ₹18,720 a month, so the NRI receives ₹41,280, and the tenant deposits ₹2,24,640 over a year. Your actual tax is worked out on the year's income after the 30% deduction on annual value and any interest on a home loan (Section 22 of the new Act), so it is often much smaller than ₹2,24,640. The difference is refunded when you file your return, or avoided upfront with a lower deduction certificate: see how to get a lower TDS certificate.

What to do next

Tell your tenant in writing, citing this section, and ask them to apply for a TAN.
Decide whether to apply for a lower deduction certificate early in the year.
Keep the TDS certificates and match them with your tax credit statement before you file your return.
When you move money abroad, follow the Form 145 / 146 process.
For the DTAA question in your home country, see the country-by-country guide.

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 Finance Act rate schedule and the new TDS rules were not read; the 30% plus 4% cess is the established rate for NRI rent and is stated by secondary sources, not by Section 393 itself ("rates in force"). The surcharge threshold is from secondary sources (taxheal), not the Finance Act text. The renumbered forms (Form 144 for the TDS statement) come from secondary sources.

Frequently asked questions

How much TDS must a tenant deduct on rent paid to an NRI in FY 2026-27?

Section 393(2) of the Income-tax Act 2025 requires deduction at "rates in force" on rent paid to a non-resident, which in practice is 30% plus 4% cess, an effective 31.2%, with surcharge only if the Finance Act thresholds are crossed. There is no minimum amount.

Is it still Section 195?

For payments before 1 April 2026, yes. From that date the Income-tax Act 2025 applies and non-resident payments sit under Section 393(2).

Does my tenant need a TAN?

Yes. A tenant who pays rent to an NRI must deduct tax, so they need a TAN, unlike a resident tenant paying rent to a resident.

Can the TDS rate be reduced?

Yes, through a lower or nil deduction certificate under Section 395, based on your actual tax liability. A DTAA changes what happens in your home country, not the Indian TDS.

What if the agreement says I receive a net amount?

Under Section 393(10) the tax is computed on a grossed-up amount so that you receive the net you agreed. The tenant ends up paying more than the stated rent.

General information, not tax advice. Rates, forms and procedures change with each Finance Act; confirm with a chartered accountant.

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