WHO ARE NRI?

NRI is often an Indian citizen but not a resident of the country. Under section 6 we can determine the residential status of an individual. According to this section 6, the following conditions holds for resident: -

  • During previous years he/she must have resided in India for 182 days at least.
  • He/she must have resided in India for 60 days during the past previous year and for 365days during immediately preceding previous years at least.

Thus, accordingly, an NRI is the one that doesn’t satisfy any criteria.


AMENITIES FOR TDS WHILE RENTING AN NRI PROPERTY

The 2017 budget which was passed changed the rules and regulations related to TDS while renting an NRI property. It further altered the rules for tax deduction at source on rent paid in our own country India. Tenants have to deduct 31.2% tax and accordingly submit the amount at desired authority. The tenant is also required to fill and submit Form 15CA. This needs to be submitted online to the income tax department irrespective of the amount of rent TDS is mandatory on the rent paid to NRI.


APPLICABLE TAX RATES

Out of the rent payable, the tax must be deducted at the rate of 31.2%. This tax rate is continuously applicable till the NRI landlord has a certificate of lower TDS. The certificate here includes all the information about his net income from India is below the exemption limit. As per the order of the AO, a certificate under section197 for lower TDS would also be required.


HOW IS TAX DEDUCTED?

Firstly tenants must have a TAN. This TAN stands for the tax account number and this can be received via the NSDL website. The website from where you can get the TAN is http://tin.tin.nsdl.com/tan/form49B.html. As soon as you receive the TAN or the tax account number the tenant can easily deduct tax each month and similarly pay the remaining amount that needs to be paid to the landlord. Also as per rule, the tax must be paid by the 7th of the following calendar month and for the month of March, TDS must be paid by 30th April. Remember that you need to pay the TDS on time else it attracts prosecution. This may lead to imprisonment which ranges from three to seven months. This prosecution falls under section 276B.

The prosecution is not at all applicable in the case where one fails to deduct tax from the rent paid by the NRI landlord.


EXAMPLE

Suppose Mr. Rehan is an NRI. He owns a residential property in Mumbai somewhere. Mr. Rehan has lent this property to Mr. and Mrs. Dubey. They pay a monthly rent of Rs 10,000.Mr. Dubey said to Mr. Rehan about negotiating the rent. When this negotiation was going on he got to know that Mr. Rehan is an NRI. Accordingly, Mr. Dubey started deducting 31.2% from the monthly rent. Similarly, he also deposits it to his TAN.

Mr. Dubey started paying rent and he also deducted TDS 31.2% from the negotiated amount. Since Mr. Dubey Was living since July so the rent was counted from the month of July.


HOW CAN AN INDIVIDUAL FILE A TDS RETURN?

Residents must file a TDS return and this needs to be done within a month. This month is counted from the end of each quarter for the TDS paid to the NRI. One needs to provide a TDS certificate. For instance, the returns must be filed by July 2019 for the TDS on rent paid for April, May, June, etc.


ADDITIONAL INFORMATION

  • Tenants must fill 15CA on the income tax portal each time rent is paid.
  • If the annual rent paid exceeds the desired amount that is Rs.5 lakh the tenant needs to take a form 15CB from CA.

CONCLUSION

The non-resident Indians can invest in various tax-saving options. The reason behind this is they think of reducing the tax burden. These taxes include a variety of things for instance Health insurance premiums, medical insurance of disabled dependents, and specified ailments too. It also includes repayment of interest on education loans, making donations, etc.


CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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