NRIs: Make The Most Of Your Rental Earnings In India
What Affects NRI Rental Earnings
There are two aspects. One pertains to laws governing the rental income (including its tax consequences).
The second relates to the investment process to channelize such income towards meeting a definite financial goal.
Money can be transferred by the tenant to a Non-Resident Ordinary (NRO) account of the NRI.
Up to $1 million of NRO funds can be repatriated in a financial year. Or, rent can be remitted directly to the foreign bank account of the NRI landlord.
Before repatriating the money, the tenant must submit Form 15CA online to the IT Department.
In some cases, Form 15CB might have to be submitted, in which a CA certifies details of the payment including TDS rate, applicable DTAA and other details.
Start Remitting Funds
Once a signed printout of Form 15CA and 15CB is submitted to the authorised banks, remittance is allowed.
Tax & TDS Rates
Since the rental income is earned in India, tax is payable in India as per the marginal income tax rate applicable for NRI.
And, there is a compulsory TDS of 31.2% that needs to be deducted by the tenant from the rent every month.
NRIs can report losses from house property if their interest payments are more than their rental income in a given year.
At present, NRIs can set-off losses of up to Rs 2 lakh from house property against income from other heads in the first financial year.
If you have one residential house in India and it is not given on rent, it will be considered self-occupied with no tax liability.
If you have a house in India and have given it on rent, the rental income will be taxed.
If your country of residence has a DTAA (Double Tax Avoidance Agreement) with India, there will be no double tax.
There are about 90 countries with DTAAs. Generally, the country where the property is situated gets the taxation rights on rental income.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.