Tax on rental income of an NRI

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This discussion clarifies the tax implications for Non-Resident Indians (NRIs) earning rental income in India. It explains that tenants may need to deduct TDS at 31.2% on rent exceeding Rs 50,000 per month, unless the NRI landlord provides a lower TDS certificate. The advice strongly recommends depositing security deposits directly into the NRI's NRO account rather than a resident Indian's account to avoid tax complications and ensure compliance.

chinu

chinu (Querist)
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12 April 2023 How is the income tax calculated on a flat owned by an NRI (residing in Singapore ) rented at Rs 37,000 p.m. which is Rs 4,44,000 per annum? Do the tenant still has to pay 31.2% tds every month to income tax dept?

CA Sanat Pyne

CA Sanat Pyne (Expert)
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12 April 2023 If the tenant is an individual or HUF (Hindu Undivided Family) and the monthly rent exceeds Rs. 50,000, then the tenant is required to deduct TDS (Tax Deducted at Source) at the rate of 31.2% under Section 195 of the Income Tax Act. However, if the NRI obtains a certificate from the Income Tax Department for lower or nil TDS, the tenant can deduct TDS accordingly.

chinu

chinu (Querist)
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12 April 2023 Thanks for the quick response.

chinu

chinu (Querist)
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12 April 2023 Thanks for the quick response sir

chinu

chinu (Querist)
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13 April 2023 Can the security money, (approx Rs 200000 ) via net banking be deposited in NRI's mother's ( resident Indian) account who is a family pension holder instead of his NRO account.

Aashok Kumar Sharma online

Aashok Kumar Sharma

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26 July 2025 Regarding your question about security money deposit:

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### Can security deposit be paid to NRI’s mother’s account instead of NRO account?

* **Technically, the security deposit should ideally be held in the NRI's NRO (Non-Resident Ordinary) account** because it belongs to the NRI and relates to the rental property income.

* **Depositing security money in a resident Indian’s (mother’s) account is not recommended**, as it may raise issues regarding the ownership and taxation of the amount.

* The security deposit is typically refundable to the tenant and is part of the rental agreement between the tenant and the NRI landlord. Hence, it should be traceable to the NRI's accounts for transparency and compliance with RBI and Income Tax regulations.

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### Implications:

* If security money is deposited into the mother’s account, it may be treated as her income or gift, which can lead to unnecessary tax complications or scrutiny.

* For correct accounting and tax purposes, it is best to **keep all rental-related funds (including security deposits) in the NRI’s NRO account**.

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### What to do?

* Advise the tenant to deposit the security amount into the NRI landlord’s **NRO account**.

* If there is an unavoidable reason to use the mother’s account, maintain proper documentation and clearly explain this arrangement to avoid disputes or tax issues.

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If you want, I can help draft a formal letter or agreement clause clarifying this for the tenant or suggest best practices for handling rental income and security deposits for NRIs.

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