NRI Landlords Can Consider This ‘Tax Hack’ to Resolve Money Stuck in TDS Deducted by Tenants

 

Many NRI landlords face a cash flow challenge when tenants deduct tax at source (TDS) at 30% (plus applicable surcharge and cess) on rental payments. While this is mandatory, the landlord’s actual final tax liability is usually lower due to available deductions (e.g., interest on housing loans, municipal taxes, standard deduction). This discrepancy often leads to NRI landlords having to file for a tax refund – resulting in a cash blockage for a period of more than a year until the refund is processed.

However, there’s a solution to ease this situation: NRI landlords can apply for a lower TDS deduction certificate. By doing so, tenants will deduct tax at a lower rate, reducing the cash blockage.

How does it work?
1. Application to the Tax Officer: NRI landlords can apply to the tax officer for a lower TDS certificate.
2. Supporting Documents: computation of estimated income and tax,
rental agreement, copy of interest schedule on housing loan (if applicable)
3. Disclosure of other India sourced income, if any

Once a lower TDS rate is issued by the tax officer, the tenant will consider that rate for deduction purposes.

This can significantly reduce the cash flow issues caused by TDS deductions and avoid the lengthy wait for a tax refund.