Rental Income In India: Why NRIs Are Running Into TDS Cuts, Notices, And Refund Delays

For many Non-Resident Indians (NRIs), rent from a property back home is meant to be a steady, predictable income. In practice, it rarely stays that simple. The trouble usually starts with how tax is deducted and ends with paperwork that drags on longer than expected.

The Upfront Deduction Problem

When a tenant pays rent to an NRI landlord, tax has to be deducted before the money is handed over. The rate is set at 30 per cent, and once surcharge and cess are added, the deduction goes a little beyond 31 per cent, according to a recent report by The Economic Times.

This happens regardless of how much the landlord actually earns or what expenses they may claim later. The tenant is required to deduct tax at this rate and deposit it with the government.

The issue becomes clear only at the time of filing returns. After taking into account the standard deduction on rental income and other eligible adjustments, the final tax liability is often lower. By then, however, a sizeable portion of the rent has already been withheld.

Why Refunds Take Longer Than Expected

To recover the excess, NRIs have to file an income tax return in India. That is where delays tend to creep in.

A refund is issued only after the tax department is able to reconcile the details on its system. If something does not line up, say, the Tax Deducted at Source (TDS) entry does not reflect correctly, the income numbers differ, or the tax has been deposited late, the claim can get held up. In practice, even minor mismatches are enough to delay the payout.

For those based overseas, keeping tabs on this is not straightforward. It often takes a while to check if the tenant has actually deposited the tax and whether the entry has correctly shown up in the tax records. Until that is sorted, the refund does not move.

Notices Often Follow Small Mistakes

Tax notices are not unusual in such cases. They are often linked to routine gaps rather than serious violations.

Not filing a return despite tax having been deducted is one of the more common triggers. Differences between the income reported and what appears in tax records can also lead to questions.

There are also basic rules that are sometimes overlooked. Rental income is expected to be credited to a Non-Resident Ordinary (NRO) account. If it is routed differently, it can invite scrutiny. In some instances, the problem starts with the tenant, incorrect deduction, or delays in depositing TDS, but the landlord still has to respond.

What Helps Keep Things On Track

Handling rental income smoothly requires paying attention to a few moving parts. It helps to check that tax is being deducted at the correct rate and deposited on time. Filing the return on time and making sure the numbers tally with what’s reflected in the tax records can help avoid repeated queries later.

Where the actual tax outgo is likely to be lower, applying for a lower deduction certificate can reduce the amount cut at source. Depending on individual circumstances, tax treaty benefits may also be available.

Rental income can still serve as a reliable stream for NRIs. But it comes with processes that need to be managed. Miss those steps, and something that seemed simple at the outset can end up becoming a back-and-forth of tax cuts, refund claims, and explanations.