Tenant TDS When Renting an NRI-Owned Mumbai Flat

Six months into the lease, the broker mentions: "By the way, your landlord lives in Dubai."

Rohan had been paying rent on his Powai 2BHK for half a year, transferring the full amount every month to an account he assumed belonged to a Mumbai-based landlord. When the broker casually mentioned the owner was actually an NRI settled in Dubai, Rohan's first reaction was mild curiosity. His CA friend's reaction, when he mentioned it in passing, was far more urgent: "Wait — have you been deducting TDS on that rent?"

He hadn't. And under Section 195 of the Income Tax Act, that omission is not the landlord's problem to fix — it is the tenant's legal liability. Renting a flat from an NRI landlord in India triggers a materially different, and more demanding, TDS regime than renting from a resident landlord. Most tenants, brokers, and even some landlords are unaware of the details until well into a lease — often only after a chartered accountant or an income tax notice flags it.

This guide is written for tenants (and the NRI landlords who need their tenants to get this right) renting flats in Mumbai, where high rents make the absolute rupee amounts involved substantial enough to matter.

Context: why NRI landlords change the TDS math entirely

If you rent from a resident Indian landlord, TDS under Section 194-I only kicks in once monthly rent crosses a threshold, and the rate is a modest 2% (as of recent rules) — many tenants never encounter it at all because the threshold isn't crossed or the landlord's PAN exempts smaller transactions from scrutiny.

Renting from an NRI landlord is governed by Section 195 instead, and the rules are stricter in three ways:

1. No minimum threshold. Every rupee of rent paid to an NRI landlord is subject to TDS — there is no floor amount below which the tenant is exempt.
2. A much higher rate. According to ClearTax's guide to TDS on NRI rental property (2026), the applicable TDS rate on rent paid to an NRI is 31.2% — not the 2% resident rate.
3. A heavier paperwork load. The tenant must obtain a Tax Deduction and Collection Account Number (TAN), deposit the deducted TDS monthly, and file Form 27Q — a quarterly TDS return specifically for payments to non-residents — rather than the simpler process for resident-landlord rent.

For Rohan, discovering this mid-lease meant retroactively working out six months of unpaid TDS liability, plus figuring out how to get compliant going forward without souring the relationship with his landlord.

Step-by-step: what the tenant must actually do

1. Confirm the landlord's residency status in writing. Ask directly, and get it documented in the lease or via email — this determines which TDS regime applies and protects you if questioned later.
2. Apply for a TAN. Unlike a PAN, which most tenants already have, a TAN is a separate registration specifically for entities responsible for deducting tax at source. Apply online through the NSDL/Protean portal; it typically takes a couple of weeks to issue.
3. Deduct 31.2% from every rent payment, before transferring the balance to the landlord. If monthly rent is ₹80,000, the tenant deposits ₹24,960 as TDS and pays ₹55,040 to the landlord.
4. Deposit the deducted TDS with the government by the prescribed monthly due date using the applicable TDS challan.
5. File Form 27Q quarterly. This return reports all TDS deducted on payments to non-residents during the quarter, including the landlord's PAN, amounts paid, and tax deducted.
6. Issue a TDS certificate (Form 16A) to the landlord, which they need to claim credit for the tax already withheld when they file their own Indian income tax return.
7. If rent is being remitted abroad on the landlord's instruction (rather than credited to their Indian NRO account), Forms 15CA and 15CB may additionally be required for the foreign remittance, per ClearTax (2026).

Illustrative Mumbai example: from gross rent to net payment

These are illustrative figures for a typical mid-tier Mumbai rental; actual TDS obligations should be confirmed with a chartered accountant, especially where a DTAA claim is in play.

Mumbai-specific realities tenants should know

• High absolute rupee amounts. Because Mumbai rents (Bandra, Powai, Andheri, Lower Parel and similar micro-markets) run well above the national average, the 31.2% TDS translates into large monthly sums — often tens of thousands of rupees — making errors or omissions far costlier than in lower-rent cities.
• NRO account crediting. Most NRI landlords instruct rent to be credited into an NRO (Non-Resident Ordinary) account rather than remitted abroad each month, which simplifies the tenant's compliance since the 15CA/15CB foreign-remittance forms are typically not needed in that case.
• Leave-and-licence structure. The vast majority of Mumbai residential tenancies use a leave-and-licence agreement rather than a standard lease — this doesn't change the TDS obligation, but tenants should ensure the agreement explicitly names the licensor's residency status and PAN for TDS documentation.
• Society NOC and compliance overlap. Housing societies in Mumbai frequently require an NOC for leave-and-licence agreements; this is a separate process from TDS but is worth handling in parallel since both require the landlord's cooperation on paperwork.

Mini scenario: Rohan's mid-lease correction

Once Rohan learned his landlord was an NRI, he had two problems: fixing the ongoing lease and addressing six months of already-paid rent with no TDS withheld. His CA advised him to apply for a TAN immediately, start deducting 31.2% from that point forward, and separately assess the retroactive exposure — since failure to deduct TDS can expose the tenant (the "deductor") to interest and penalty under the Income Tax Act, even though the underlying tax liability belongs to the landlord.

His landlord, keen to stay compliant on the Dubai side too, provided a Tax Residency Certificate (TRC) and Form 10F, which allowed Rohan's CA to check whether a lower rate under the India-UAE Double Taxation Avoidance Agreement (DTAA) could apply instead of the standard 31.2%. The DTAA route required additional documentation but meaningfully reduced the monthly TDS burden for both parties once approved.

DTAA relief: lowering the tenant's deduction rate

Where the NRI landlord is a tax resident of a country with which India has a Double Taxation Avoidance Agreement, the treaty rate on rental income may be lower than the domestic 31.2%. To claim this reduced rate, the tenant typically needs from the landlord:

• A valid Tax Residency Certificate (TRC) issued by the landlord's country of residence.
• A completed Form 10F providing additional details not captured on the TRC.
• Sometimes a self-declaration regarding the landlord's beneficial ownership of the rental income.

Without these documents in hand, the tenant should default to deducting the standard 31.2% — deducting less without proper DTAA documentation is a compliance risk that falls on the tenant.

Pro tips

1. Ask about the landlord's residency status before signing the lease, not after — it changes your entire compliance obligation from day one.
2. Apply for a TAN as soon as you know you're renting from an NRI; the registration lead time means starting late compounds the retroactive-compliance problem.
3. Set a recurring calendar reminder for the monthly TDS deposit deadline — missing it triggers interest charges that accumulate quickly on Mumbai-scale rents.
4. Request the landlord's TRC and Form 10F early if a DTAA rate might apply — assembling this documentation takes time and is far easier before a compliance deadline is looming.
5. Keep copies of every TDS challan and Form 16A issued — both parties will need these at tax-filing time, and disputes are much easier to resolve with a clean paper trail.

Common mistakes to avoid

1. Treating it like a resident-landlord lease and applying the lower 194-I threshold-based rate — this is the single most common and costly error.
2. Not registering for a TAN, assuming a personal PAN is sufficient for deducting and depositing TDS on someone else's behalf.
3. Skipping months of TDS deduction because the landlord "said not to worry about it" — the legal liability sits with the tenant regardless of the landlord's preference.
4. Ignoring Forms 15CA/15CB when rent is being remitted directly abroad rather than credited to an Indian NRO account.
5. Failing to claim a DTAA rate the landlord may actually be entitled to, resulting in over-deduction that complicates the landlord's own refund process.

How DrawMagic fits into this process

DrawMagic is a software and information platform — it does not deduct taxes, remit payments, or act as an escrow intermediary between tenant and landlord. What it does offer is planning clarity on both sides of this transaction. NRI landlords can use DrawMagic's buyer financial planning tools to model their net rental yield after the 31.2% TDS and the separate 30% standard deduction that applies when they file their own return — helping them see the real cash-flow picture rather than just the headline rent figure. The property tax calculator is useful for estimating the Mumbai municipal property tax on the flat, a cost landlords typically bear separately from tenant TDS. And the DrawMagic help center offers a tenant compliance checklist covering TAN registration, Form 27Q timelines, and documentation to request from an NRI landlord.

If you're an NRI landlord evaluating whether your current Mumbai rental is performing well relative to the market, DrawMagic's buyer resources can help you benchmark expectations before renewing or renegotiating a lease.

Value note

For NRI landlords, understanding the tenant's TDS obligation isn't just a compliance footnote — it directly affects net cash flow and how much of a "gross rent" figure quoted to a broker actually lands in the bank each month. Modelling net yield after both TDS and the standard deduction, before listing the flat for rent, avoids unpleasant surprises for both landlord and tenant.

Key Takeaways

• Renting from an NRI landlord shifts the TDS regime from Section 194-I (resident, threshold-based, lower rate) to Section 195 (non-resident, no threshold, 31.2% rate), per ClearTax (2026).
• The tenant, not the landlord, is legally responsible for deducting and depositing this TDS — and for filing Form 27Q quarterly.
• Tenants need a TAN, not just a PAN, to legally deduct and deposit TDS on payments to a non-resident landlord.
• Forms 15CA and 15CB may additionally apply if rent is remitted directly abroad rather than credited to the landlord's NRO account.
• A landlord's Tax Residency Certificate and Form 10F can unlock a lower DTAA rate, but only with proper documentation in hand before deduction.
• Missing months of TDS deduction, or applying the wrong resident-landlord rate, exposes the tenant to interest and penalty risk under the Income Tax Act.
• The 30% standard deduction available to the landlord does not change or reduce the tenant's 31.2% deduction duty — the two operate independently.
• Always confirm current rates, thresholds, and DTAA applicability with a qualified chartered accountant before finalizing a lease with an NRI landlord.

FAQ

Q: What happens if I've already paid several months of rent without deducting TDS? A: Consult a CA promptly. As the tenant, you carry the deduction liability, and the sooner you register for a TAN and correct course, the more you limit interest exposure. Retroactive fixes are possible but time-sensitive.

Q: Does the 31.2% TDS rate ever get lower? A: Yes, if the landlord qualifies for DTAA relief in their country of tax residency and provides a valid TRC and Form 10F before the deduction is made.

Q: Is this different if I'm renting a commercial space rather than a residential flat from an NRI? A: The core Section 195 obligation to deduct TDS on payments to a non-resident still applies broadly, but always confirm the specific rate and any threshold nuances for your transaction type with a CA.