Are you an NRI renting out property in India? Here is who can help to manage it; how to pay tax and remit money abroad

Non-resident Indians (NRIs) can legally own and rent out property in India, whether it is a family home they inherited, an investment flat they have purchased or a house they chose to keep after moving abroad.

Renting out such property can provide a steady income while also ensuring that it remains occupied and maintained.

However, managing a rental property from abroad can be challenging, particularly when it comes to handling tenants and repairs, collecting rent, completing documentation and complying with tax rules.

Here is what NRI property owners need to know about managing rent, getting professional assistance and repatriating rental income.

How to receive rent while living abroad?

An NRI can let out their property in India by using online rent agreements, digital tenant verification, e-stamping and a non-resident ordinary (NRO) bank account for rent collection, which can be further remitted abroad.

Tenants can transfer the rent amount through NEFT, IMPS, or UPI linked to the NRO account. Many landlords also set up automatic reminders or use a property manager to follow up on payment dates.

Funds in an NRO account are partially repatriable up to $1 million per financial year, subject to applicable conditions and payment of taxes where required. The house owner must also keep rent collection consistent and documented to make the repatriation process easier.

Many people may wonder if they can receive rent in their non-resident external (NRE) account instead as funds maintained in it can be fully repatriated outside India. However, Indian residents cannot make direct payments or deposit local funds into a NRE account.

In the event the tenant is an NRI or a person of Indian origin (PIO), only then the landlord can receive rent for immovable property in their NRE account, according to a blog post by ICICI Bank.

Who can manage property on behalf of an NRI?

NRIs have several options for managing rental property in India, depending on how much assistance they need and how frequently they can oversee the property themselves.

A trusted family member or friend can handle basic tasks like coordinating with tenants, handing over keys and arranging repairs. Such a representative can be appointed through a Power of Attorney (POA) to carry out specified legal and administrative tasks on the NRI’s behalf.

Alternatively, a property management company can handle day-to-day responsibilities, including finding tenants, collecting rent and coordinating maintenance. This option can be considered if you cannot appoint a POA or need professional assistance.

Some NRIs combine these options. For instance, a property manager may handle daily operations, while a POA holder signs the rent agreement or completes other formalities that require the owner’s authorisation.

Do NRIs pay tax on rent earned in India?

Rental income earned by a non-resident Indian (NRI) from property in India is taxable under the head ‘Income from house property’ at the applicable income-tax slab rates. NRIs can claim a deduction for municipal taxes paid during the financial year, along with the standard deduction of 30% of the net annual value, while calculating taxable rental income.

Under Section 195 of the Income-tax Act, 1961, rent paid to an NRI is generally subject to Tax Deducted at Source (TDS) at the applicable rates, including surcharge and cess, wherever applicable. The final tax liability depends on the individual’s taxable income and the applicable tax provisions.

As an NRI, you may also consult your tax advisor to analyse relevant Double Taxation Avoidance Agreement (DTAA) to claim any benefit on such rental income available under such agreement.