Section 195 (Income-tax Act, 1961) → Section 393(2) (Income-tax Act, 2025)
If you’re renting a home or an office from a landlord who is a Non-Resident Indian (NRI), there’s one compliance step that’s easy to miss but important to get right: deducting tax at source (TDS) before you pay the rent. The good news is that once you understand the rule, it’s a simple, routine part of your monthly rent payment — and with the new Income-tax Act, 2025 coming into effect from 1 April 2026, the framework you already know is simply getting a fresh section number, not a fresh set of headaches.
Why TDS applies at all
Under Indian tax law, a tenant paying rent to an NRI landlord is treated as a person responsible for paying income to a non-resident. That brings the payment within the scope of the TDS provisions for non-residents — currently Section 195 of the Income-tax Act, 1961, and from 1 April 2026, Section 393(2) of the Income-tax Act, 2025. Unlike rent paid to a resident landlord (where TDS under Section 194-I kicks in only above a threshold), TDS on rent to an NRI applies from the very first rupee, regardless of the amount.
The position under the Income-tax Act, 1961 (Section 195)
Here’s what a tenant needs to keep in mind today:
- Rate of TDS: The default rate is 30% of the rent, plus applicable surcharge (based on the landlord’s income level) and 4% health and education cess — commonly worked out to an effective 31.2% where no surcharge applies. This is a headline rate; a lower rate may apply under a Double Taxation Avoidance Agreement (DTAA) or a certificate from the Assessing Officer.
- TAN, not just PAN: The tenant must obtain a Tax Deduction Account Number (TAN) — a one-time, straightforward registration on the Protean (formerly NSDL) portal — before deducting and depositing TDS.
- PAN of the landlord: If the NRI landlord does not have a PAN, Section 206AA can push the deduction rate higher, so it’s always worth requesting the landlord’s PAN upfront.
- Lower or nil deduction certificate: If the landlord’s actual tax liability is lower than the flat TDS rate, they can apply under Section 197 for a certificate permitting deduction at a reduced rate — this is a very common and perfectly legitimate route for NRI landlords.
- DTAA relief: Where India has a tax treaty with the landlord’s country of residence, a lower treaty rate may apply, generally supported by a Tax Residency Certificate (TRC) and Form 10F from the landlord.
- Forms 15CA and 15CB: Where the rent (or the TDS-net amount) is being remitted abroad, the tenant or the remitting bank will typically need Form 15CA (self-declaration) and, where applicable, Form 15CB (a chartered accountant’s certificate) before the transfer.
- Depositing TDS: The deducted tax must be deposited with the government by the 7th of the following month (for March, the due date is 30 April).
- Quarterly TDS return: The tenant must file Form 27Q every quarter, reporting the payment and the tax deducted.
- TDS certificate: A Form 16A certificate must be issued to the landlord within 15 days of the due date for filing Form 27Q, so they can claim credit for the tax deducted.
A practical tip we give our clients: agree with the NRI landlord, in the rent agreement itself, on who bears the TDS — net or gross of tax — and collect PAN, TRC and Form 10F at the very start of the tenancy. It saves back-and-forth later.
What changes under the Income-tax Act, 2025
The Income-tax Act, 2025 takes effect from 1 April 2026 and reorganises India’s direct tax law into a cleaner, more consolidated structure. For TDS on payments to non-residents — including rent to an NRI landlord — the reassuring message is one of continuity:
- New section reference: Section 195 of the 1961 Act is now Section 393(2) of the 2025 Act (Table 2, Serial No. 17 of the consolidated TDS table).
- Rates and principles unchanged: The 2025 Act does not change the rate of TDS applicable to rent paid to a non-resident, or the underlying principle that TDS applies from the first rupee. It simply houses the same rule under a new, consolidated numbering system.
- DTAA benefits continue: Treaty relief and the process of claiming a lower rate under a DTAA remain unaffected by the recodification.
- Familiar forms, new numbers: As part of the same consolidation, some forms have been renumbered — Form 15CA becomes Form 145, Form 15CB becomes Form 146, and Form 27Q becomes Form 144. The underlying filing process and information required stay materially the same.
In short: if you are already deducting TDS correctly on rent paid to an NRI landlord, you are already compliant with the spirit of the 2025 Act. The transition mainly means quoting the new section and form numbers in your paperwork from 1 April 2026 onwards.
At a glance: 1961 Act vs 2025 Act
| Aspect | Income-tax Act, 1961 | Income-tax Act, 2025 |
| Governing provision | Section 195 | Section 393(2), Table 2, Sl. No. 17 |
| Effective from | Currently in force | 1 April 2026 |
| TDS rate on rent to NRI | 30% + surcharge (if any) + 4% cess | Unchanged |
| Threshold for deduction | None — from the first rupee | Unchanged |
| Remittance declaration | Form 15CA / 15CB | Form 145 / 146 |
| Quarterly TDS return | Form 27Q | Form 144 |
| DTAA / lower deduction relief | Available (Sec 197, TRC + Form 10F) | Available, unaffected |
A quick checklist for tenants
- Confirm your landlord’s residential status and obtain their PAN, TRC and Form 10F at the start of the tenancy.
- Apply for a TAN before the first rent payment, if you don’t already have one.
- Deduct TDS at the applicable rate (checking for any Section 197 certificate or DTAA benefit) before each rent payment.
- Deposit the TDS by the 7th of the following month and file Form 27Q (Form 144 from FY 2026-27 onwards) every quarter.
- Issue Form 16A to your landlord promptly, so they can claim credit when filing their own return.
The takeaway
TDS on rent paid to an NRI landlord is a well-defined, manageable compliance step — and the move to the Income-tax Act, 2025 doesn’t add complexity, it simply renumbers a process most diligent tenants and their advisors already follow well. With the right documentation collected upfront and timely deposits and filings, there’s nothing here to worry about.
If you’re a tenant paying rent to an NRI landlord, or an NRI landlord wanting to make sure your tenant is deducting correctly, our team at Mittal & Company would be glad to help you set this up right — from TAN registration to DTAA relief and every return in between.
This article is for general guidance based on the law as currently understood, including the Income-tax Act, 2025 provisions scheduled to take effect from 1 April 2026. Rules and forms under the new Act may be refined through further notifications; please consult us for advice specific to your situation.
Disclaimer: This article is intended for general informational purposes only and should not be construed as professional, legal, or tax advice. While every effort has been made to ensure accuracy as of the date of publication, applicable laws, rules, and regulations are subject to change. Readers are advised to consult with us or another qualified professional before making any decisions based on this content.