Earning rental income from property in India can be a lucrative avenue for Non-Resident Indians (NRIs), but the tax treatment comes with its own set of rules and deductions. To help you maximize your returns and stay compliant in the 2025 filing season, this guide covers everything from gross annual value to TDS obligations and allowable deductions.
1. Rental Income Is Taxable in India for NRIs
Under the Income-tax Act, rental income from Indian property—whether residential or commercial—is fully taxable in India for NRIs, regardless of where you reside. It falls under “Income from House Property” and must be declared in your ITR.
2. Computing Gross Annual Value (GAV)
Your taxable rental income begins with the Gross Annual Value (GAV). This is the higher of:
| Component | Definition |
| Actual Rent Received | Total rent you actually receive in the year. |
| Reasonable Expected Rent | Municipal valuation or fair rent as determined by local authorities. |
Note: If your property was vacant for part of the year, GAV is adjusted pro-rata.
3. Allowable Deductions Under “Income from House Property”
Once GAV is determined, you can reduce it by three key deductions:
| Deduction | Rate/Limit | Notes |
| Municipal Taxes Paid | 100% of actual taxes | Only if paid by you and not recovered from tenant |
| Standard Deduction | 30% of GAV | Flat rate covering repairs, maintenance, etc. |
| Interest on Home Loan | Actual interest payable (up to ₹2 L for self-occupied; unlimited for let-out) | Loan must be taken for acquisition/construction of property |
Example:
GAV: ₹3,00,000
– Municipal taxes: ₹20,000
– Standard deduction: ₹90,000 (30% of GAV)
– Loan interest: ₹1,20,000
Net Rental Income = ₹3,00,000 – (₹20,000 + ₹90,000 + ₹1,20,000) = ₹70,000
4. Tax Rate & Filing Requirements
- ITR Form: NRIs must use ITR-2 to report rental income under Schedule HP.
- Tax Slab: Net rental income is added to your other taxable Indian income (e.g., capital gains) and taxed at the applicable individual slab rates (up to 30% plus surcharge and cess for high earners).
5. TDS on Rental Payments
When an NRI receives rent, the tenant (or rent-collecting agent) is responsible for deducting 30% TDS under Section 195 (plus surcharge and cess).
- TDS Certificate: Tenant issues Form 16A; make sure to collect it every quarter.
- Form 26AS: Verify TDS entries match your Form 16A before filing.
If TDS > actual tax liability, you can claim a refund by declaring the credit in your ITR.
6. Step-by-Step: Reporting Rental Income in Your ITR
- Gather Documents: Form 16A, property tax receipts, loan interest certificate.
- Calculate GAV & Net Income: As per sections 2 & 3 above.
- Select ITR-2: Navigate to “Income from House Property (Schedule HP)”.
- Enter Values:
- GAV in House Property section
- Municipal taxes, standard deduction, and interest under respective fields
- GAV in House Property section
- Declare TDS Credit: Under Schedule TDS2, enter TDS details exactly as per Form 26AS.
- Submit & E-Verify: File by July 31, 2025, and complete e-verification via Aadhaar OTP, net-banking, or bank ATM.
7. Common Pitfalls & How to Avoid Them
| Mistake | Correction/Tip |
| Forgetting municipal taxes | Keep tax receipts handy; declare 100% under deductions |
| Using self-occupied limits for let-out | For let-out property, interest is fully deductible |
| Mismatch in TDS details | Cross-verify Form 16A and Form 26AS before filing |
| Wrong ITR form | Always use ITR-2 for house property income |
8. How Taxsure.ai Simplifies Rental Income Taxation
- Auto-Calc GAV & Deductions: Enter rent and let our engine compute GAV, deductions, and net income.
- TDS Tracker: Import Form 26AS data and map TDS certificates seamlessly.
- ITR-2 Pre-Filler: Pre-populates Schedule HP, TDS2, and bank-account details.
- Deadline Alerts: Never miss filing or e-verification dates.
Final Call to Action
Managing rental income for NRIs need not be a maze of calculations and certificates. With Taxsure.ai, all your GAV computations, deductions, and TDS credits are handled automatically—so you focus on growing your real-estate portfolio, not your tax forms.
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