EaseValueAn NRI who lets out an Indian flat is taxed on very little of the rent. The Income-tax Act, 2025 allows a flat 30% standard deduction under Sections 20 to 24, plus the municipal taxes you actually paid and the whole of your home-loan interest, before a rupee of tax is charged. Yet the tenant deducting tax under Section 393 gets none of that: the obligation is to deduct at the non-resident rate on the gross rent credited, with no regard to your deductions, your slab, or whether you have any tax liability at all. The result is systematic and severe over-withholding. On a ₹60,000-a-month flat with a modest loan, a landlord whose real tax is nil can still have well over ₹2 lakh a year taken at source — money that returns only as a refund, a year or more later, after a return is filed. This calculator computes both figures side by side, shows you the gap in rupees, and tells you what a lower-deduction certificate under Section 395 would put back in your hands during the year rather than after it.
How it’s calculated
- Gross annual value is your monthly rent multiplied by twelve. This is the figure your tenant's TDS is computed on under Section 393 — before any deduction you are entitled to.
- Municipal or property tax is subtracted from gross annual value to arrive at Net Annual Value, but only where you actually paid it during the year. Tax that merely became due, or that the tenant paid, does not qualify.
- A flat 30% of Net Annual Value is deducted as the standard deduction under Sections 20 to 24 of the Income-tax Act, 2025. It requires no bills and no proof of expenditure — you get it whether you spent nothing on the property or repainted the whole flat.
- Interest on money borrowed to buy, build, repair or reconstruct the property is deducted in full. On a let-out property there is no ₹2 lakh ceiling on the interest deduction itself, unlike a self-occupied house.
- What remains is your income from house property. Where interest exceeds the rent net of the other deductions, the result is a house-property loss.
- A house-property loss can be set off against your other income only up to ₹2,00,000 in a year. The balance is carried forward for up to eight assessment years and can then be set off only against house-property income — and only if the return was filed by the due date.
- Your other taxable Indian income is added on, because tax is charged on total income, not on the rent in isolation. NRO interest, Indian dividends, capital gains and consultancy fees all push the rent into higher slabs.
- Tax is computed on the default-regime slabs — nil to ₹4 lakh, then 5%, 10%, 15%, 20%, 25% and 30% in ₹4 lakh steps — plus 4% health and education cess, plus surcharge where total income crosses ₹50 lakh, ₹1 crore or ₹2 crore.
- The rebate under Section 156, which makes income up to ₹12 lakh tax-free, is deliberately not applied. It is available to resident individuals only, and this is one of the most expensive misunderstandings among NRI landlords.
- TDS under Section 393 is computed at 30% of the gross rent, plus 4% cess, plus surcharge where the rent itself crosses the surcharge thresholds — giving an effective 31.2% in the ordinary case.
- The gap between the TDS deducted and your actual tax is the refund locked up. Where your tax exceeds the TDS deducted, the shortfall must be paid as advance tax across the year or interest runs under Sections 424 and 425.
Why NRI landlords over-pay tax almost by design
There is nothing unusual about a landlord being taxed on net rather than gross rent. What is unusual about the NRI position is that the collection machinery and the charging provisions run on entirely different figures, and nobody reconciles them until a return is filed many months after the year has closed. Your tax liability is built under Sections 20 to 24 of the Income-tax Act, 2025, which take the rent, subtract the municipal taxes you paid, allow a flat 30% standard deduction on what remains, and then allow the whole of your borrowing interest. Your tenant's deduction obligation is built under Section 393, which simply requires tax at the rates in force on the sum credited or paid to a non-resident. The tenant is not asked to consider your deductions and is in no position to verify them.
The arithmetic that follows is stark. Take a flat let at ₹60,000 a month — ₹7,20,000 a year of gross rent. The tenant must deduct roughly ₹2,24,640, being 30% plus cess. Now compute the actual liability: ₹18,000 of municipal tax paid brings the Net Annual Value to ₹7,02,000; the 30% standard deduction removes ₹2,10,600; loan interest of ₹3,50,000 removes the rest, leaving taxable house-property income of ₹1,41,400. Against the basic exemption of ₹4 lakh, the tax due is nil. The entire ₹2,24,640 is an interest-free loan to the government, recoverable only through a filed return and a processed refund — in practice twelve to twenty months after the first month's rent was earned.
This is not a rare edge case. It is the ordinary position of an NRI who owns a mortgaged flat in an Indian city, which describes a very large share of the community. The over-withholding scales with the rent: at ₹2.5 lakh a month with other Indian income of ₹10 lakh, the calculator shows ₹9,36,000 deducted against real tax of ₹5,17,296 — a gap of ₹4,18,704 in a single year. What makes it worth calculating is that the position is entirely fixable in advance, and almost nobody fixes it.
The 30% standard deduction — the most generous line in the Act
The flat 30% deduction on Net Annual Value is unusual among Indian tax provisions because it is unconditional. It is not a reimbursement of expenditure and it is not capped by what you actually spent. A landlord who spends nothing at all on the property in a given year gets the full 30%; a landlord who spends more than 30% on repairs gets 30% and no more. There are no bills to keep, no vouchers to produce, and no scope for the assessing officer to disallow part of it as unreasonable. For a property held for years with the structural work long since done, it is close to pure relief.
Two points about its mechanics are frequently missed. First, it is computed on Net Annual Value, not on gross rent — that is, after municipal taxes have been subtracted. This means the municipal taxes you pay do double duty: they come off directly, and they also reduce the base on which the 30% is computed, so the effective relief on a rupee of municipal tax is more than a rupee of deduction would suggest. Second, the deduction covers repairs and collection charges in a broad sense, which is why you cannot also claim actual repair expenditure, painting, society maintenance or brokerage paid to find a tenant on top of it. The 30% is the whole of that allowance.
What sits outside the 30% is the interest deduction, and that is the important structural point. Interest on borrowed capital is a separate allowance and is not absorbed by the standard deduction. So a mortgaged property attracts both — 30% of Net Annual Value and the entire interest bill. On a let-out property there is no ₹2 lakh ceiling on the interest itself, which is the meaningful difference from a self-occupied house. It is this combination, standard deduction plus unrestricted interest, that so often takes a well-rented property to nil taxable income while the tenant continues to withhold 31.2% of everything.
Section 395 — the certificate that ends the problem before it starts
The remedy the Act provides is a lower-deduction or nil-deduction certificate under Section 395 — the provision that carried the number 197 in the old Act and is still widely known by its application form, Form 13. The application is made online through the TRACES portal by the recipient of the income, in this case you. You set out the rent, the deductions you are entitled to, your computation of the resulting tax, and ask the assessing officer to authorise your tenant to deduct at a lower rate — or, where your computed liability is nil, at no rate at all. The officer issues a certificate specifying the rate, and the tenant is then legally required to deduct at that rate rather than the default one.
The value of that certificate is exactly the gap this calculator displays. If your real tax is nil and ₹2,24,640 would otherwise be withheld, the certificate is worth ₹2,24,640 of cash flow for the year, every year it is renewed. In the ₹2.5 lakh-a-month example it is worth over ₹4 lakh a year. Against that, the cost of applying is modest — professional fees and some document gathering — and the application can be made for a portfolio of properties at once.
Timing is what defeats most people. The certificate operates prospectively. It cannot reach back and undo deductions already made, so a certificate obtained in January does nothing about the nine months of rent already withheld against. The application should therefore be made at the start of the financial year, ideally in April, and renewed annually — certificates are issued for a financial year and lapse with it. If you are letting a property for the first time, apply before the first rent falls due. And note that the certificate is issued to the deductor with your PAN specified: if you change tenants mid-year, the position needs revisiting, because the certificate names the payer.
What your tenant is actually required to do — and why it matters to you
The most common assumption among individual tenants is that TDS on rent means the 2% domestic provision that applies to a resident landlord above a monthly threshold, deducted with nothing more than a PAN. That is not the position where the landlord is a non-resident. Rent paid to a non-resident falls under Section 393, and three consequences follow that catch individual tenants by surprise. The deduction is at the rate in force for a non-resident, not 2%. There is no minimum threshold — the obligation applies from the first rupee, whether the rent is ₹15,000 a month or ₹15 lakh. And the tenant must obtain a TAN, deposit the tax monthly, and file quarterly returns in Form 27Q, from which your Form 16A is generated.
When the tenant does not do this — usually through simple ignorance rather than evasion — the exposure is theirs, not yours. A person who fails to deduct is treated as an assessee in default and can be recovered from directly, along with interest for the failure and a penalty. Cases surface years later, typically when the tenant's own return is examined or when a property transaction brings the arrangement to light, and by then the landlord is often uncontactable and disinclined to help. Tenants who understand this correctly become very insistent about it, which is why an NRI landlord who is casual about disclosing their status can find a tenancy unravelling.
From your side, the practical consequence of no deduction is not a windfall. Your liability is unchanged; what has changed is that nothing is being collected against it. That converts your position into one where advance tax is payable in instalments across the year, and failing to pay it attracts interest under Sections 424 and 425. The honest approach is to disclose your non-resident status to the tenant at the outset, help them obtain a TAN if they are an individual doing this for the first time, and apply for a Section 395 certificate so that the amount they have to deduct and deposit is small or nil. That serves both sides: your cash flow improves and their compliance burden shrinks.
The house-property loss, the ₹2 lakh cap, and the eight-year carry-forward
Where the interest on a property loan is large relative to the rent — common in the first years of a mortgage, and common wherever a property was bought as an investment rather than for yield — the computation produces a negative figure. That is a house-property loss, and it is a genuine asset if handled correctly and a wasted one if not. The loss can be set off against your other income in the same year, but only up to ₹2,00,000. The balance does not disappear: it is carried forward for up to eight assessment years, and in those later years it can be set off only against income from house property, not against salary, interest or capital gains.
The condition that catches people is procedural. Carrying a loss forward requires that the return for the year in which the loss arose was filed by the due date. File late and the carry-forward is forfeited outright — the loss is simply lost, with no relief and no discretion available. For an NRI landlord running a loss of several lakhs in the early years of a loan, this is an expensive way to learn the rule, and it is the single strongest practical argument for filing an Indian return on time even in a year where no tax is payable and no refund is being claimed.
Note also how the cap interacts with your circumstances. If you have no other Indian income at all, there is nothing for the ₹2 lakh to be set off against, so the entire loss carries forward. If you have substantial other Indian income, the ₹2 lakh is used immediately and the rest still carries forward. Either way the loss is preserved for eight years, and it becomes valuable in later years when the loan has amortised, the interest has fallen and the property is throwing off taxable income — at which point the accumulated losses can shelter it. Keeping a clean year-by-year record of losses claimed and carried forward is worth the small effort.
Filing, refunds, and the things this calculator leaves out
For most NRI landlords the return is not optional. Once tax has been deducted at source, filing is the only mechanism by which the excess comes back, and a refund is never issued automatically. Before filing, reconcile the rent you received against your Form 26AS and the Annual Information Statement — mismatches are common where the tenant has deposited tax under the wrong section or the wrong quarter, and an unreconciled mismatch delays the refund considerably. You will generally need an Indian bank account validated on the portal to receive the refund; an NRO account serves for this. Where a house-property loss is being carried forward, filing by the due date is essential for the reasons set out above.
A few surrounding points are worth flagging even though the calculator does not model them. Rental income arising in India is taxable in India regardless of any treaty, because the source country retains taxing rights over immovable property income, but you will usually also have to report the same rent in your country of residence — where relief for the Indian tax paid comes through the treaty under Section 159, or through unilateral relief under Section 160 where no treaty exists. Keep the Indian tax challans and Form 16A, because your foreign credit claim will depend on them. Where a property is jointly owned, each co-owner is taxed on their own share, and the deductions, the ₹2 lakh loss cap and any Section 395 certificate all operate per person — which frequently improves the overall position and is worth modelling separately for each owner.
What the calculator deliberately does not attempt: it does not compute deemed rent on a second property lying vacant, it does not model a property let for only part of the year or one with unrealised rent, and it does not handle the case where the annual value must be determined by reference to municipal or fair rent rather than actual rent received. It applies surcharge at the headline rates without modelling marginal relief at the surcharge thresholds. And it computes an annual liability rather than tracking the month-by-month deduction and deposit cycle your tenant actually runs. For the question it exists to answer — how much of my rent is being over-deducted, and what is a Section 395 certificate worth to me — the annual view is the right one, and the number it produces is the number to take to your adviser.
Frequently asked questions
Why is my tenant deducting over 31% of my rent?
Because rent paid to a non-resident falls under Section 393 of the Income-tax Act, 2025, which requires deduction at the rate in force for a non-resident — 30% plus 4% cess, giving 31.2%, with surcharge on top where the rent crosses ₹50 lakh. That deduction is computed on the gross rent credited, before the 30% standard deduction under Sections 20 to 24, before municipal taxes and before your loan interest. Your actual tax is computed on the net figure after all of those, which is why the two numbers differ so widely.
Can I stop the TDS if my actual tax is nil?
Yes — apply for a nil-deduction certificate under Section 395 (old Section 197, Form 13) through the TRACES portal. You set out the rent, your deductions and your computed liability, and the assessing officer authorises your tenant to deduct at a lower rate or at no rate. It operates only prospectively, so it cannot recover deductions already made. Apply at the start of the financial year and renew it annually, because certificates are issued for a financial year and lapse with it.
Do I get the ₹12 lakh rebate that makes income tax-free?
No. The rebate under Section 156 of the Income-tax Act, 2025, which corresponds to the old Section 87A, is available to resident individuals only. A non-resident does not get it at any income level. This calculator therefore computes your tax without it, which is why an NRI with ₹7 lakh of rental income shows a liability where a resident with identical income would show nil. It is one of the most expensive misunderstandings among NRI landlords and it materially changes the arithmetic.
Is the 30% standard deduction available even if I spent nothing on the property?
Yes, and that is what makes it valuable. The 30% deduction under Sections 20 to 24 is unconditional — it is not a reimbursement of expenditure, requires no bills, and cannot be reduced because you spent less. Equally, you cannot claim more by spending more, and you cannot claim actual repairs, painting, society maintenance or brokerage on top of it. It is computed on Net Annual Value, meaning after the municipal taxes you paid have already been subtracted.
Can I deduct my full home-loan interest, or is it capped at ₹2 lakh?
On a let-out property the interest is deductible in full — the ₹2 lakh ceiling applies to a self-occupied house, not to one that is rented. This is a real advantage of letting rather than leaving a property empty. Where the interest exceeds the rent net of the other deductions, the result is a house-property loss, and it is at that point that a separate ₹2 lakh limit becomes relevant: the loss can be set off against your other income only up to ₹2,00,000 a year, with the balance carried forward for eight years.
What happens to a house-property loss I cannot use this year?
It is carried forward for up to eight assessment years and can be set off in those years only against income from house property, not against salary, interest or capital gains. The critical condition is procedural — the carry-forward is available only if the return for the loss year was filed by the due date. File late and the loss is forfeited outright, with no relief and no discretion. This is the strongest reason to file an Indian return on time even in a year with no tax payable.
My tenant is not deducting any TDS. Is that a problem for me?
It is primarily their exposure, not yours — a person who fails to deduct under Section 393 is treated as an assessee in default and can be recovered from directly, with interest and penalty, often years later. But it changes your position too. Your liability is unchanged and nothing is being collected against it, so you must pay it yourself as advance tax in instalments across the year. Miss those and interest runs under Sections 424 and 425. The better approach is to disclose your status, help the tenant obtain a TAN, and get a Section 395 certificate so the amount they must deposit is small or nil.
Do I have to pay tax on this rent in my country of residence too?
Usually you must report it there, yes. Income from immovable property is generally taxable in the country where the property is situated, so India retains the right to tax the rent regardless of any treaty, but your country of residence will often tax your worldwide income as well. Relief for the Indian tax already paid comes through the treaty under Section 159, or through unilateral relief under Section 160 where no treaty applies. Keep your Indian challans and Form 16A, because the foreign credit claim will depend on documenting the Indian tax.
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