Are you an NRI earning from rentals in India? High TDS, tax notices & refund delays explained
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NRI tax Trouble: Why your Indian income isn’t so simple
If you’re an NRI earning money in India—think NRO accounts or rental properties, the tax situation can get messy fast. The rules are complicated, TDS rates are steep, and you’re often left with a bigger chunk taken out than you really owe. Then you’re stuck chasing refunds for months.
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Why TDS hits NRIs so hard
Section 195 is tough. Banks and tenants take TDS at a flat, high rate. For NRO account interest and rental income, you get hit with 30% plus surcharge and cess. That’s about 31.2%, no matter how much you actually make.
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NRO interest & rental income—the real story
Every rupee of interest from your NRO savings or FDs? Taxable in India. And when it comes to rent, your tenant must deduct TDS at 31.2%—right from the start, with no lower limit. That means you’re almost guaranteed to lose more upfront than you should.
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Tax notices NRIs often get
A lot of NRIs end up with tax notices because:
- You forgot to file your ITR even though TDS was deducted
- There are mismatches in AIS or Form 168 (earlier called Form 26AS)
- Your rent lands in the wrong account (NRE, not NRO)
- Your tenant doesn’t handle TDS properly
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Tenant mistakes? You pay the price
Even if you play by the book, your tenant still needs to:
- Deduct TDS the right way
- Get a TAN
- Submit Form 145/146 (Earlier Form 15CA/15CB)
- Give your Form 131 (earlier Form 16A)
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Chasing TDS refunds—a waiting game
Since TDS almost always overshoots your actual tax, you’ll have to:
- File ITR-2
- Use the DTAA (with a TRC and Form 41 (earlier Form 10F)
- Ask for lower TDS (Form 128, earlier known as Form 13)
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How NRIs can stay out of trouble
Here’s how to avoid headaches:
- Have rent deposited in your NRO account
- Give your PAN to dodge higher TDS
- Take DTAA benefits early
- Consider a lower TDS certificate