TDS and GST on Rent from property for NRIs

Super User

Non-Resident Indians (NRI) who are letting out the properties in India have to know two basic tax information, namely Income Tax and GST

Income Tax / TDS / Withholding Tax – Suppose, an NRI let-out his flat in Koramangala to an individual for residential purpose on a monthly rent of Rs.35000. Should the tenant deduct tax (TDS/Withholding tax)? Or if an NRI let-out his commercial / industrial building to a company, should they deduct tax?

The answer is YES in both the cases. Irrespective of the nature of property i.e., residential or commercial, let-out to individual or company, TDS is applicable. TDS rate to be applied is 31.20% for FY 2018-19.

The process is as under –

• The tenant has to obtain TAN (Tax Deduction Account Number)
• The tenant has to deduct tax (TDS) at 31.20% of the rent
• Deposit the same into the government on or before 7th of the subsequent month
• File eTDS return on every quarter
• Issue Form 16A to the landlord

I came across a case yesterday wherein an NRI is getting Rs.30 Lakhs as rent from letting out a commercial building at Lavelle Road. The tenant is deducting TDS at 30% and the NRI is under the impression that GST is not applicable to him.

Is it true? Definitely NO. In case of letting

• A commercial property (no GST on letting out residential property for residential purpose) and
• The total rent per year exceed Rs.20 lakhs, the landlord (Resident or Non-Resident) is obliged to collect GST from the tenant and deposit to the government.

The process is as under –

• NRI has to register under GST (in case 1 and 2 above are satisfied)
• Issue GST invoice (Rent + 18% on rent) in the prescribed format
• Collect GST and pay to the government on or before 20th of the subsequent month
• File form GSTR - 3B and GSTR -1 on or before the due dates (delayed filing attract penal provisions)

Income Tax Return filing

Though TDS is done by the tenant at a maximum rate, the owner of the property is obliged to file Income tax return on or before 31st July of the subsequent year.

Lower Tax Certificate

In case, the tax liability of the owner is lower (after considering Interest on housing loan, property tax, etc, if any), then he has an option of applying for a lower tax certificate from the Income tax Office.