Lower TDS certificate for NRI rental income — reducing the default deduction
Tenants renting from an NRI landlord are required to deduct TDS under Section 195 at the rate applicable to non-residents, regardless of the landlord's actual tax bracket. A lower TDS certificate under Form 13 lets the landlord bring that deduction down to their real computed liability instead.
The tenant's obligation, and why it's stricter than it looks
A tenant renting from an NRI landlord is legally required to deduct TDS on the rent before paying it — this applies to essentially any amount of rent, without the exemption threshold that protects small resident landlords from withholding under a different section. Many tenants either don't know this obligation exists or apply it inconsistently, which creates its own compliance risk for the tenant and cash-flow uncertainty for the landlord.
Why the default rate usually overshoots
The rate a tenant is expected to apply under Section 195 is a flat figure that has nothing to do with the landlord's actual total income or tax slab. An NRI with only one rented-out property and no other significant Indian income can end up with far more withheld than their real tax bill for the year, simply because the tenant has no way to know (or verify) that.
Get a certificate that fixes the rate to your actual liability, from your next rent payment.
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Once a lower TDS certificate is issued specifying the rate the tenant should apply, the tenant deducts accordingly from the next rent payment onward — it isn't retroactive to rent already paid. Because rental income is recurring, this is worth setting up properly rather than accepting the default rate every month and reconciling the difference once a year. See our documents checklist for what's needed.
Renewal, and giving the tenant clear instructions
Because certificates are issued for a specific financial year, this needs to be renewed annually if the rental arrangement continues — see our guide to certificate validity. It also helps to give your tenant the certificate directly, in writing, along with clear instructions on the rate to apply, rather than assuming they'll interpret it correctly on their own.
Does my tenant need to do anything once I have a lower TDS certificate?
Yes — you need to share the certificate with them directly, since they're the one responsible for deducting and depositing the tax. They should then apply the specified rate (or nil rate) to future rent payments and reference the certificate details when filing their TDS returns.
This article is for general information only. For your specific situation, consult a practicing CA.
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