A Bengaluru landlord recently lost a confirmed tenant after a simple compliance issue spooked the deal. Once the tenant realised the owner was an NRI, he backed out, citing the need to deduct 30% TDS on rent and file it with the government himself, a process he didn’t understand.
The issue gained attention after a Reddit post by a Bengaluru-based landlord described losing a tenant solely because of the tax deduction obligations attached to renting from an NRI owner.
“Found a great tenant for my Bangalore flat. We agreed on everything. Then he called back. Sir, you’re an NRI, right? I have to deduct 30% TDS from your rent and file it myself with the government. I don’t know how to do this. I’m out. Just like that. Gone. But honestly, even resident landlords aren’t having a great time. People forget this part,” the post said.
Tax experts explain that while these were introduced to improve tax reporting and plug leakages in rental income disclosures, they have increasingly become a friction point in India’s urban rental markets, especially in cities like Bengaluru, where premium rentals are common.
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Higher TDS burden for NRI landlords
Tax experts say the compliance framework for rental payments to Non-Resident Indian (NRI) landlords has become significantly more stringent under the Income Tax Act, 2025, which came into effect from April 1, 2026.
“Rent from property situated in India is legally deemed to accrue or arise in India under Section 9(2)(b), making it taxable in India. Hence, TDS has to be deducted by the tenant when paying rent to NRI ,” Vivek Jalan, partner, Tax Connect Advisory Services LLP, said.
He explained that, unlike rental payments to resident landlords, which are governed by specific thresholds and lower deduction rates, payments made to NRIs fall under the residual withholding category applicable to non-residents.
“Under the Income-tax Act, 2025, as amended by the Finance Act, 2026, the TDS rate on rent paid to an NRI is 30% plus applicable surcharge and cess, effectively making it 31.2% in most cases. The rate can rise further if the NRI’s annual income exceeds ₹50 lakh,” Jalan said.
He further pointed out that, unlike resident landlords, where the 2% TDS requirement under Section 194-IB applies only if rent exceeds ₹50,000 per month, there is no minimum exemption threshold for TDS deduction on rent paid to NRIs.
However, tax experts noted that relief may still be available in certain cases. “If the NRI landlord believes the actual tax liability would be lower, either the tenant or the landlord can approach the Assessing Officer under Sections 395(1) or 395(2) to obtain a certificate for lower or nil deduction of tax,” Jalan said.
Tenants face extensive compliance obligations
Experts say the operational burden of these rules falls heavily on tenants, many of whom are unfamiliar with tax deduction and filing procedures.
“The biggest burden is the compliance burden on the tenant,” Jalan said. “When paying rent to an NRI, the payer must comply with specific reporting requirements.”
According to him, tenants are required to deposit TDS every month through the income tax portal using the applicable challan, file quarterly TDS statements in Form 144 for non-resident payments, and furnish remittance details through Form 145.
“‘Income by way of renting or or letting out any real estate asset’ is a specific reporting category under this form,” he explained.
In cases where taxable rent remittances exceed ₹5 lakh in a financial year, and no lower deduction certificate has been issued, tenants may also need to obtain an accountant’s certificate in Form 146. Additionally, a TDS certificate in Form 131 must be issued to the landlord, experts pointed out.
Tax professionals say tenants commonly make mistakes such as deducting TDS at incorrect rates, missing monthly deposit deadlines, failing to obtain a TAN, or filing incorrect forms. Such lapses can attract interest liabilities, late filing fees, and penalties under tax provisions.
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Impact visible in Bengaluru’s premium rental market
Tax experts say the compliance burden is increasingly influencing rental decisions in cities such as Bengaluru, particularly in premium housing markets where a large number of apartment owners are NRIs.
“This complexity has begun to affect rental transactions in premium markets such as Bengaluru, where many landlords are NRIs,” Jalan said. “Tenants often withdraw from deals upon realising the compliance burden, leading to a chilling effect in the high-value rental segment.”
Experts noted that many prospective become hesitant once they learn they would be personally responsible for deducting TDS, obtaining TAN registration, filing returns, and handling compliance documentation linked to the landlord’s tax obligations.
“Thus, while the law ensures tax security, its operational impact is significant, creating deterrence in transactions where tenants are not equipped to handle such compliance,” Jalan said.
(Disclaimer: This report is based on user-generated content from social media. HT.com has not independently verified the claims and does not endorse them.)