Renting Out Property as an NRI: What's Different (Tax, Power of Attorney, Repatriation)

As an NRI landlord, imagine this: your tenant pays rent every month, but almost a chunk of it never even reaches your bank account. It is sent straight to the government before a single rupee gets transferred into your account. This is not a scam.

It is the law, and it applies only because you do not live in India. Renting out a property in India while you live abroad is very different from renting out as a regular resident. Though the house is the same, the rules around it are not.

In this blog, you will learn everything you must know as an NRI landlord who is looking to rent out their property. It covers everything, from taxes to your responsibilities as a landlord.

Key Takeaways

• 31.2% of the rent gets deducted before it reaches an NRI landlord’s bank account.
• Some amount of the 31.2% deduction is received back while filing taxes.
• A Power of Attorney manages property in India on behalf of the landlord
• The rent sent to an NRI landlord is transferred to an NRO account.
• Rental money can be sent abroad, but there is an annual limit that most people never reach.

How Renting Out Property Differs for NRIs v/s Resident Landlords

If you live in India and have a flat to rent out, the process is simple and straightforward. Tax only gets deducted if the rent is more than ₹50,000 a month, and even then, the deduction is a small amount. But if you are an NRI, the process gets much more complicated than you think.

A much bigger cut is taken from your rent, no matter how small the rent amount is. Apart from that, since you do not live in India, you will need someone trustworthy to sign papers, collect the rent, or fix anything that goes wrong. Once the rent is collected, sending it to your country of residence involves a bunch of other steps too.

Why is there a 31.2% Deduction?

Though the number sounds harsh, the math behind it is simple - 30% tax and a 4% extra charge on that 30%. Together, they add up to 31.2%, under Section 195 of the Income Tax Act, 1961. If your income in India is very high, this deduction can be even higher.

This happens because it becomes easier for the government to collect tax right away through your tenant than to try and collect it from you later, especially since you live in another country. So, they take it upfront, and the rest is settled later.

Furthermore, from the next financial year, this rule of 31.2% deduction will be renamed Section 393 of the Income Tax Act, 2025. Nothing else changes.

How is Rental Income Taxed?

The 31.2% deduction is not your final tax bill. It is just the money set aside early. When you calculate what you actually owe, you get some relief.

You can deduct 30% of your rental income automatically, and if you have a home loan on that property, you can deduct the interest you are paying on it too. After these deductions, whatever is left gets taxed at regular rates, which is usually less than 31.2%.

This is why NRIs file a tax return every year - to get back the extra amount that was deducted. If the country you live in also taxes this same rental income, there is usually a treaty between India and that country that stops you from being taxed twice on the same money.

How Does a Power of Attorney Help?

Since you cannot be in India every time something needs signing, a Power of Attorney lets you legally give a person the right to act on your behalf. That person can be a parent, a sibling, or a property manager. They can

• Sign the rental agreement
• Collect the rent
• Talk to the housing society
• Handle disputes

To make a Power of Attorney valid, you need to sign a document at an Indian embassy or get it certified where you live. It is better to keep this person's powers limited to only what is needed. Make sure that it is someone you trust completely as they have power over your property.

Where Should Your Rental Income Reflect?

Once you are an NRI, every rupee you earn in India, including rent, has to reflect in a specific type of account called an NRO account. It is neither a regular savings account nor an NRE account.

The tenant deposits the rent in this account after tax is deducted. You will also be able to see the tax cut on the government's website, along with an annual certificate confirming it. In simple words, an NRO account is the place where all your rental money lands and is sent abroad.

Repatriation: How is Rental Income Sent Abroad?

Since rent is considered regular ongoing income, you can send it abroad whenever you like, as long as the tax on it is sorted. To transfer the money, you will need the following two things:

• Form 15CA, a certificate from an accountant confirming that your taxes are fine
• Form 15CB, a self-declaration form filled out by you

Your bank checks both of these things before sending the money to your account abroad. If the amount is small, say under ₹5 lakh in a year, you might not even need the accountant's certificate. In 2026, these forms were given new names, Form 146 and Form 145 respectively, but how they work remains unchanged.

What is Covered Under the $1 Million Repatriation Limit?

You are allowed to send up to $1 million every year from your NRO account without taking any special permission. However, there are a couple of points to remember:

• This limit is for you as a person, not per bank account. So, having money spread across different banks does not make room for extra spending.
• It is a shared limit. Your rent, any money from selling property, and anything else you send out in the same year add up together against this single limit.

But the silver lining is that the money sitting in your NRE account has no such limit. It can move freely without any cap whenever you want.

Common Mistakes Made By NRIs While Renting Out

The biggest mistake an NRI landlord can make is not telling their tenant that they are an NRI. If the tenant does not know this, they will deduct the smaller amount meant for resident landlords, which is wrong. As a consequence, both the tenant and the landlord can get in trouble.

Another common mistake is not filing taxes on an annual basis. Skipping tax filing means that you lose out on the money you were supposed to get back. Moreover, renting your house out with just a verbal agreement and no Power of Attorney can cause further problems if something goes wrong while you are far away.

Some people also forget to switch from their old savings account to an NRO account, which is not allowed. Surprisingly, many do not bother asking for a lower tax deduction, even when they do not actually owe that much, which means that the government holds onto their money for longer than necessary.

Conclusion

Renting out your property in India while living abroad is not hard because something is broken. It is just that two sets of rules overlap - how India taxes your income and how India controls the money being transferred to another country.

Once you understand that the upfront deduction is not your final tax, that a Power of Attorney simply allows someone to act on your behalf in India, and that sending money abroad is a clear process, it stops feeling complicated. It then becomes a short checklist you need to follow once a year.