Renting out Indian property as an NRI — the working guide

Renting out an Indian flat as an NRI is easier than it was a decade ago — digital platforms find tenants, online rental agreements cover the paperwork, and payments move through bank transfers — but the compliance layer around an NRI landlord is heavier than most tenants realise. The single most common fault line is Section 195 TDS: tenants paying rent to an NRI are obliged to withhold tax at rates they almost never apply correctly, and the consequences (interest, penalty, notice to the NRI's PAN) land on the landlord.

This page works through agreements, tax, repatriation, and day-to-day management in that order.

Lease vs Leave and License — pick the right instrument

Two different legal instruments govern residential rentals in India.

Lease. Created under Section 105 of the Transfer of Property Act, 1882. Transfers an interest in the property to the lessee for a defined term and rent. Governed by the Rent Control Act of the state for older premises in certain cities (Mumbai, Delhi, Kolkata, Chennai continue to have provisions applying to specified older buildings).

Leave and License. Created under the Indian Easements Act, 1882. A licence to occupy the premises; no interest passes to the licensee. The licensor retains legal possession; the licensee merely enjoys the right of use. Leave and license agreements are outside most rent-control regimes, and disputes typically go to a civil court or a tenancy tribunal rather than the rent controller.

Key differences that matter when you need to get the tenant out:

Dimension	Lease	Leave and License
Legal nature	Interest in property	Personal right of occupation
Rent Control Act	Applies in covered cases	Generally outside
Eviction route	Rent Controller + civil suit	Civil suit; often faster
Typical duration	1-99 years	11 months, renewable
Registration	Compulsory if over 11 months	Compulsory if over 11 months
Best for	Long-let of owned property	NRI residential lets, short-term stays

Default recommendation for NRI landlords of residential property: Leave and License, 11 months at a time, renewed. That avoids registration-fee pain, avoids old rent-control exposures, and keeps eviction on a civil-court track rather than a rent-controller track.

Model Tenancy Act — a parallel regime gaining ground

The Model Tenancy Act, 2021 — circulated by the Ministry of Housing and Urban Affairs — creates a unified, faster dispute-resolution regime for residential and commercial rentals. States are adopting it with modifications:

Adopted / enacted: Andhra Pradesh, Uttar Pradesh, Tamil Nadu (in substance), and several Union Territories.
In process: Maharashtra, Karnataka, Haryana, and others have draft bills at various stages.
Not yet: States that have retained their older Rent Control Acts — notably West Bengal, Kerala, Delhi.

Where enacted, the Model Tenancy Act sets up a Rent Authority, caps security deposits at 2 months' rent for residential and 6 months' for commercial, standardises notice and eviction procedures, and makes the written agreement compulsory. If you're letting out in a state that has adopted it, use the state-specific template — it enjoys the statutory framework for enforcement.

Registration and stamp duty

Under the Registration Act, 1908, a lease or leave-and- license agreement for more than 11 months is compulsorily registrable. The widely-used 11-month term is not a legal requirement — it simply keeps the document below the registration threshold in most states.

Where registration is required:

Stamp duty varies by state, typically a percentage of the total rent + security deposit for the term. For example, Maharashtra charges 0.25% of (average annual rent × number of years + 10% of deposit); Karnataka and Tamil Nadu have similar scaled rates. Mumbai and other parts of Maharashtra also allow full online registration through the eRegistration / e-Leave-and-Licence portal, usable by NRIs without physical presence.
Registration fee — ~1% of the same base.
e-stamping / e-Leave-and-Licence portals in several states enable the full process remotely — identification via Aadhaar e-KYC for the licensor is a hurdle for NRIs; many use a PoA holder for the registration visit.

For 11-month agreements in states that do not require registration, a simple e-stamped agreement (₹100–₹500 stamp paper or online e-stamp voucher) is sufficient evidence.

Security deposits — regional custom

Region	Typical deposit
Bengaluru	10 months' rent (falling; 6-8 now common)
Chennai, Hyderabad	6-10 months
Mumbai, Pune	2-3 months
NCR (Delhi, Gurgaon, Noida)	2-3 months
Kolkata	2-3 months

Where the Model Tenancy Act has been adopted, the cap is 2 months' rent regardless of local custom. Southern market practice runs ahead of the statutory cap where not yet enacted.

Refund of the deposit on vacation is the most frequent dispute. Specify in the agreement: refund within 15–30 days of vacation net of outstanding rent, documented damages, and unpaid utility charges. Retain the tenant's ID, photograph, and local address to pursue post-vacation disputes.

TDS on rent paid to an NRI — Section 195

This is the single most important paragraph on this page for an NRI landlord.

When a tenant pays rent to a resident Indian landlord, TDS applies under Section 194-I at 10% only where annual rent exceeds ₹2.4 lakh, or under Section 194-IB at 2% (effective October 2024) if the tenant is an individual not liable to tax audit paying rent above ₹50,000/month.

When the tenant pays rent to an NRI landlord, the rules are entirely different and much stricter:

Section 195 applies. The tenant must deduct TDS on every rupee of rent paid — no threshold.
Rate — 30% base rate plus applicable surcharge and 4% health and education cess. Effectively ~31.2% at the lowest surcharge bracket, higher for rents that push the landlord's income into higher surcharge tiers.
TAN — the tenant must obtain a Tax Deduction Account Number before deducting.
Form 27Q — quarterly TDS return.
Form 16A — issued to the NRI landlord.
Remittance — monthly, by the 7th of the following month.

The landlord can reduce this by:

Section 197 certificate — applying to the jurisdictional Assessing Officer for a lower or nil TDS rate, calculated on the estimated actual tax liability after Section 24 deductions. This is the sensible path for most NRI landlords; the effective rate after Section 24's 30% standard deduction is often 15%-20%, not 30%.
DTAA invocation — a PAN, a current TRC from the landlord's country of residence, and an electronically-filed Form 10F can reduce the rate under the relevant treaty (though most DTAAs do not significantly reduce tax on income from immovable property — the source state retains full taxing rights).

Practical consequence: without intervention, an NRI landlord loses roughly a third of gross rent to TDS each month, claimable only at return-filing time. With a Form 13 certificate in hand, the cash flow normalises.

Tenants frequently do not know they have this obligation. When the Income-tax Department eventually cross-matches PAN data against NRI returns, both the tenant (default in TDS deduction) and the landlord (for compliance notices) end up in proceedings. Put the Section 195 obligation into the rent agreement so the tenant is under contractual notice of it.

Taxation of rental income in India

Rental income from Indian property is taxable in India under the head "Income from House Property", regardless of the landlord's residential status.

Old regime computation

Gross Annual Value (GAV)         = Higher of actual rent and
                                   notional rent (typically
                                   actual for a let-out flat)

Less: Municipal taxes paid       (property tax actually paid)

Net Annual Value (NAV)

Less: 30% standard deduction     (under Section 24(a) —
                                  no receipt needed; covers
                                  repairs, collection, etc.)

Less: Home loan interest         (under Section 24(b) —
                                  unlimited for let-out
                                  property)

Income from House Property

New regime (default from FY 2023-24)

The 30% standard deduction under Section 24(a) still applies. Home loan interest on let-out property under Section 24(b) continues to be deductible in the new regime. What's restricted in the new regime is set-off of a house property loss against other heads of income — limited to ₹2 lakh per year.

Tax on the net

The Income from House Property is added to the NRI's total Indian income and taxed at slab rates (new or old regime, at the NRI's option). The TDS already deducted under Section 195 is adjusted against this final liability on the return.

DTAA and the resident-country return

The rent is also reportable in the NRI's country of residence (US, UK, Canada, Australia, etc.). Credit for Indian tax paid is available under the applicable DTAA — see DTAA and how it works. In most treaties, the source state (India) retains primary taxing rights on rental income, so the Indian tax paid is the higher of the two and forms the ceiling for credit.

Repatriating rent abroad

Rent must credit to the NRI's NRO account (not NRE — rent from Indian property is Indian-source income and goes to NRO as a matter of FEMA classification).

From NRO, the NRI can repatriate up to USD 1 million per financial year, covering rent and other NRO credits combined, through:

Form 15CA (self-declaration by the remitter/landlord on the income-tax portal).
Form 15CB (CA certificate confirming that Indian taxes have been paid / deducted on the amount being repatriated).
The NRO bank processes the outward remittance through its authorised dealer category-I branch.

For the repatriation mechanics in more detail, see transfer of funds from India.

Finding and screening tenants from abroad

The platforms that dominate the Indian residential rental market:

NoBroker, NestAway, MagicBricks, 99acres, Housing.com — listing + broker-optional models. NoBroker is the widely-used direct-listing platform.
Specialised co-living operators — OYO Life, Stanza Living, Zolo, Colive — rent full flats from owners and sublet by bed. A way to skip individual-tenant hassle but with rent discounts of 15%–25%.

Tenant verification:

Most cities (Mumbai, Delhi, Bengaluru, Hyderabad, Chennai, Pune) legally require police verification of tenants. Non-registration attracts penalty and, after an incident, legal exposure on the landlord.
Verification is typically done by the tenant at the local police station, with acknowledgement shared with the landlord.
Employment verification, last-landlord reference, and ID document copies (Aadhaar, PAN, passport for foreign tenants) are standard diligence.

Property management from abroad — the three options

Option A — Family member or trusted friend. Collects rent (into your NRO account directly, not through them), handles small issues, deals with tenant handover. Cheapest, most variable.

Option B — Professional property management company. Charges 1 month's rent annually (or 8%–10% of monthly rent) for finding tenants, rent collection, maintenance coordination, and renewals. Quality varies sharply; insist on a written service agreement.

Option C — Co-living / master-lease operator. Rent the whole flat to an operator at a 15%–25% discount to market; they sublet and handle everything. Acceptable if the yield hit is worth the hands-off.

Whichever route, give the manager a specific, time-bound, registered PoA covering only the administrative acts needed (rent collection, tenant signing, utility coordination, small repairs below a stated amount). Never a sale-authorising PoA.

Short-term and vacation rentals

Airbnb-style short lets are legal in most Indian cities but increasingly restricted at the society / AOA level: many housing societies in Mumbai, Bengaluru, and NCR now prohibit short-term lets in their bye-laws, concerned about security and wear-and-tear. Confirm the society stance before listing.

Service apartment operators (Wanderlust, FabHotels Stays, StayVista) manage the flat for short-let operation and share revenue. Higher yield, heavier operational overhead and furniture investment.

Tax treatment of short-let revenue depends on whether it is treated as "income from house property" (passive rent) or "business income" (hotel-like operation). For furnished short lets with services, it tips toward business income — different computation, GST implications above the ₹20 lakh turnover threshold.

Maintenance, society dues, property tax — who pays what

Default custom (override in the agreement if needed):

Property tax — landlord.
Society maintenance / AOA charges — landlord (in most states); tenant where local custom differs (parts of Mumbai).
Sinking fund / corpus — landlord.
Electricity, water, gas — tenant, on sub-meters.
Minor repairs below a de-minimis (say ₹2,000) — tenant.
Major repairs, structural maintenance, appliance replacement — landlord.
Damages by tenant — tenant; recovered from deposit.

Specify the split in the agreement. Vague "maintenance at actuals" language always produces disputes.

Rent escalation and renewal

Annual escalation — typical clause sets a 5%–10% increase per year at renewal. Maharashtra, Karnataka, and Tamil Nadu customarily use 5%–8% for residential.
Fixed-term vs renewable — an 11-month agreement is the industry standard, auto-renewable by mutual consent. Build in a notice period for non-renewal (typically 2 months) from either side.
Reserved right of entry — for inspection twice a year with prior notice.

Eviction — the hard reality

Even with a tight Leave and License agreement, eviction of a tenant who refuses to vacate after the term ends is typically a civil-court process that takes 18 months to 3 years in most jurisdictions. States with the Model Tenancy Act's Rent Authority see faster disposition (often 60–120 days), but enforcement still depends on the court infrastructure on the ground.

Mitigants:

Registered agreement with biometric execution where available — easier to prove in court.
Post-dated cheques from the tenant as security for rent (dishonour triggers Section 138 Negotiable Instruments Act proceedings — criminal, faster).
Police verification on record.
Prompt renewal or non-renewal notice — ambiguous rollover is where tenants dig in.
Arbitration clause in commercial lets; less common for residential but increasingly used for high-value lets.

Checklist for an NRI landlord

Pick a Leave and License agreement (or MTA template where adopted); 11-month term, renewable.
Register the agreement if the state requires; use e-Leave-and-Licence in Maharashtra, equivalent portals elsewhere.
Obtain police verification of the tenant.
Give the tenant written notice of the Section 195 TDS obligation; agree the TAN and monthly mechanics.
Apply for a Section 197 lower-TDS certificate to cap withholding at the post-Section-24 effective rate.
Open / confirm an NRO account for rent credits; set up standing instructions with the tenant.
Set up a PoA for a property manager or trusted relative with narrowly-scoped powers.
File Form 15CA / 15CB when repatriating; stay within the USD 1 million per FY cap.
File the Indian tax return (ITR-2) annually, claim Section 24 deductions, reconcile TDS.
Report the rental income in your resident-country return and claim the DTAA credit.

Summary

Leave and License is the default instrument for NRI residential lets — outside most rent-control regimes and faster to enforce than a lease.
The Model Tenancy Act simplifies things where adopted: 2-month deposit cap, standardised eviction, a Rent Authority.
Section 195 TDS on rent paid to an NRI is non-trivial (~31% at base) and tenants routinely miss it. A Section 197 lower-deduction certificate fixes the cash-flow impact.
Rental income is taxed under Income from House Property with the 30% standard deduction and full home-loan interest deduction for let-out property, under both old and new regimes.
Rent credits to NRO; repatriation via Form 15CA/CB within the USD 1 million / FY ceiling.
Management from abroad works through a narrowly-scoped PoA or a professional manager — never through a sale-enabling PoA.

For the tax computation framework and treaty mechanics, see DTAA and how it works. For fund transfers between countries, see transferring funds from India.