NRI Rental Income From Bangalore: TDS, Expenses and the Real Yield
Consider a flat in Bangalore bought for Rs. 2.2 Crore and rented at Rs. 65,000 a month. On paper the yield is about 3.5%, but an owner abroad receives only about a third of the headline rent in cash during the first year. This guide explains why, covering the costs of letting, the tax that a tenant has to cut when the landlord lives abroad and the options for reducing it.
Where the Rent Goes: A Worked Example
This example uses round numbers for a 1,800 sq ft flat. Real quotes from the association, the property manager and a tax adviser should replace them in an actual plan.
| Line | Per year |
|---|---|
| Twelve months of rent | Rs. 7.80 Lakhs |
| Headline yield on Rs. 2.2 Crore | 3.5% |
| One vacant month | Rs. 65,000 |
| Rent actually collected | Rs. 7.15 Lakhs |
| Society maintenance, Rs. 6 for each sq ft monthly | Rs. 1.30 Lakhs |
| Manager's cut, 8% of the rent collected | Rs. 57,200 |
| Municipal tax and insurance | Rs. 20,000 |
| Repairs and upkeep | Rs. 25,000 |
| Net rent before any tax | Rs. 4.83 Lakhs |
| Net yield before any tax | 2.2% |
| TDS taken by the tenant (31.2%) | Rs. 2.23 Lakhs |
| Cash that reaches the owner | Rs. 2.60 Lakhs |
The yield falls from 3.5% to 2.2% once costs are met. Cash in hand during the year is only about 1.2% of the price, since Rs. 2.23 Lakhs stays with the tax department until the owner claims it back.
Reading the Three Numbers
Gross yield divides annual rent by the home's price, and it is the figure quoted in adverts. Net yield subtracts what owning and letting cost. For a non-resident, a third number matters as well: what reaches the bank after tax is withheld.
A buyer comparing homes should calculate all three. The gap between the first and the last is often wider than expected.
Everyday Costs of a Rented Flat
Owners living in India and abroad face the same bills. The association levies maintenance by the square foot every month, occupied or not, and large gated communities charge more than many newcomers to investing assume. Between tenants, a flat usually stays empty for some weeks.
Finding a tenant costs either a broker's fee or a yearly payment to a manager, and the city corporation levies property tax. Add insurance, repainting and, for a furnished home, appliance servicing. An owner overseas generally hires a manager to show the flat, draft the agreement, collect the rent, supervise repairs and recover the keys. Fees differ, so the service list should be put in writing.
How Tax at Source Works for NRI Rent
Any tenant of an NRI landlord must cut tax before every single payment. The tax is charged at 30% on the rent, with 4% cess on that and any surcharge that applies, giving a floor of 31.2%. There is no rent floor, unlike the Rs. 50,000 monthly limit used for resident landlords.
Until 31 March 2026 this lived in the 1961 Act's section 195, and the new Act has moved it to its own section 393. The tenant holds back the tax, deposits it with the authorities and hands the owner a certificate. If a tenant fails to do this, the department can recover the tax and interest from that tenant, so company tenants insist on it.
Think of the deduction as a prepayment. Rental income is taxed on what remains after municipal taxes paid, a flat 30% allowance on the balance, and interest on a home loan if there is one. An owner with a small income elsewhere in India often owes well below 31.2% of the rent, and the surplus comes back once a return is filed.
Cutting the Deduction at Source
When the real tax will be below the standard rate, the owner may petition the Assessing Officer for a certificate that sets a reduced rate. The 2025 Act provides for it in section 395, in place of the earlier section 197. The request is submitted on the portal with an estimate of income and tax for the year.
The certificate carries the tenant's name and the approved rate. It applies for the stated period only, so a new one is required every financial year and with every change of tenant. Many owners get a chartered accountant based in India to handle it, together with the annual return.
Bringing the Money Home
Rupee rent goes into an NRO account in the owner's name. It counts as current income and may be sent out of the country after the tax has been settled. Banks ask for tax documents at that stage, so certificates and filed returns should be stored together.
The owner needs a PAN for the TDS credit, the return and the refund alike. The country where the owner lives may also tax the rent, with credit for Indian tax under a treaty. The rules differ by country and call for local advice.
Buying With Rent in Mind
A buyer who intends to rent out the home should model the numbers before booking. A sensible order is the following:
- Compute gross yield on the total outlay, with duty, registration fees, GST and interiors counted
- Apply the association's monthly dues across all twelve months
- Allow for a vacant month at the least, and more in a project just delivered
- Include management fees, local tax, cover for the home and a repair fund
- Deduct 31.2% to arrive at first-year cash flow, then plan for a lower-rate certificate
Loan interest and instalments change the picture further, and the monthly outgo can be seen in the EMI calculator. Locations close to big employment hubs in Bangalore tend to be let sooner. Our NRI page describes how we assist overseas buyers from shortlisting to completion.
This article offers general information on tax for 2026-27. Provisions are amended through every Finance Act, so confirm the position with a tax adviser before acting.
