Owning from afar: tax, renting it out, managing and selling

Buying the property is a project. Owning it from six thousand kilometres away is a relationship. It needs a bit of attention every year, a few trusted people on the ground, and a basic grasp of how India taxes you as a non-resident.

This post covers the long middle part of the story: renting it out, paying tax on it, keeping it in good shape, and eventually selling. Where the law gets detailed, we'll tell you what to ask your CA rather than pretend a blog post can replace one.

A quick word on the new Income-tax Act

From 1 April 2026, the Income-tax Act, 2025 replaced the Income-tax Act, 1961. The broad ideas below - how rent is taxed, how capital gains work, why buyers deduct tax when an NRI sells - carried over. But section numbers changed, and so did some form names.

Old section numbers are still everywhere online, so we mention a few because they're familiar. Please confirm the current section and form references with your CA before you file anything.

Renting it out

Finding the right tenant

From abroad, a good tenant is worth more than a slightly higher rent. Someone who pays on time, looks after the place and calls you when the geyser stops working is gold.

A few things that help:

• Use a reputable property manager or broker who does proper background checks.
• Ask for ID, employment proof and, where possible, a reference from a previous landlord.
• Get police verification of the tenant done. It's required in many cities and sensible everywhere.

The rent agreement

Put everything in writing. Rent, deposit, notice period, annual increase, who pays for maintenance and minor repairs, and what happens at the end of the term.

Many landlords use an 11-month agreement, which avoids some of the registration requirements for longer leases in many states. Others prefer a registered longer lease for the extra protection. There are trade-offs either way, and the rules vary by state, so ask a local lawyer. Whatever you choose, keep a signed copy and an inventory of what's in the flat, with photographs.

How rent is taxed when you're an NRI

Rental income from property in India is taxable in India, even if you live abroad. A few points that surprise people:

• Your tenant has to deduct tax before paying you. For rent paid to an NRI, this is at 30% plus applicable surcharge and cess. That's much higher than the rate for resident landlords.
• Your tenant needs a TAN (tax deduction account number) to do this, and has to deposit the tax and issue you a TDS certificate. Many tenants don't know this. Your property manager or CA should explain it to them at the start.
• When you file your return, you can claim the standard deduction on rental income, municipal taxes you've paid, and interest on a home loan for the property, within the limits allowed.

Because 30% deducted up front is often far more than your actual tax, you may end up waiting for a refund. To avoid that, you can apply to the tax department for a lower or nil deduction certificate. If it's granted, your tenant deducts at the lower rate shown on it. Your CA can tell you whether your situation makes it worthwhile.

Give your tenant a simple one-page note explaining the TDS requirement, your PAN and how often they should deposit it. It saves a lot of awkward phone calls in March.

Paying tax twice? Usually not

If your country of residence also taxes your worldwide income - the US, the UK, Canada and Australia all do, in different ways - you might worry about being taxed on the same rent twice.

That's what Double Taxation Avoidance Agreements (DTAAs) are for. India has them with most major countries. Typically, India taxes the rent because the property is here, and your home country gives you a foreign tax credit for the Indian tax you've already paid.

To claim that credit abroad, you'll usually need proof of the Indian tax - your TDS certificates and your Indian return. And to claim DTAA benefits in India, you may need a Tax Residency Certificate from your country of residence. Get your Indian CA and your local tax adviser to talk to each other once. It's worth it.

Filing an Indian tax return

A lot of NRIs assume that because tax was already deducted, there is nothing left to do. Not quite. If your rent, capital gains or other Indian income is above the basic exemption limit, you need to file an Indian return. And even if it is not, filing is the only way to get back excess TDS, which, with rent taxed at 30% up front, is money many landlords are owed.

You'll need a PAN. If you don't have one, apply now - you need it to buy, rent out and sell property anyway. Make sure your PAN record shows your correct residential status and an up-to-date email and phone number, because that's where tax notices go.

Looking after the property from afar

A flat that sits empty for two years doesn't stay in the condition you left it. Dust, damp, plumbing and the occasional neighbour's leak all take their toll.

Some practical options:

• A professional property manager - handles tenants, rent collection, repairs and inspections for a fee.
• A trusted family member - cheaper, but be clear about what you're asking them to do, and don't let it slide into informal ownership.
• The society or RWA - useful for maintenance updates and common-area issues.

Whoever it is, ask for a quarterly inspection with photographs. Pay maintenance, property tax and utility bills on time, ideally by auto-debit. Unpaid property tax has a way of becoming a much bigger problem later.

Selling: where most of the tax questions live

Short-term or long-term?

For property, the line is 24 months. Sell within 24 months of buying and the gain is short-term, taxed at your normal slab rates. Hold for longer and it's long-term.

The July 2024 change

For sales on or after 23 July 2024, long-term capital gains on property are taxed at 12.5% without indexation, plus surcharge and cess. Before that, the rate was 20% with indexation, which adjusted your purchase price for inflation.

Resident individuals and HUFs selling property bought before 23 July 2024 can choose whichever of the two methods gives the lower tax. NRIs don't get that choice. For an NRI, it's 12.5% without indexation. That can make a real difference on a property held for a long time, so run the numbers with your CA before you agree a price.

The buyer deducts tax, and it's not 1%

This is the bit that trips up the most sales.

When a resident sells property, the buyer deducts 1% TDS. When an NRI sells, the buyer has to deduct tax under a different provision - Section 195 in the old Act - at the rates that apply to the capital gain, plus surcharge and cess. In practice, if nothing else is arranged, buyers often deduct on the whole sale price, not just the gain. The buyer also needs a TAN.

That can mean a large chunk of your money held up until you file a return and claim a refund. The fix is to apply for a lower deduction certificate - this was Form 13 under the old Act - before the sale. Your CA works out the actual capital gain, the tax department issues a certificate, and the buyer deducts only that amount.

It takes time to come through, so apply as soon as you're serious about selling.

Saving tax on the gain

Two exemptions are commonly used, and NRIs can use both:

• Section 54 (old Act) - if you reinvest the long-term gain from a residential property in another residential house in India, within the time limits, the gain can be exempt up to the amount reinvested. There's an overall cap on the exemption.
• Section 54EC (old Act) - invest the gain in specified long-term bonds within six months of the sale, up to a fixed limit, and hold them for the lock-in period.

The conditions are strict, and the time limits really do matter. Talk to your CA before the sale, not after.

Selling while you're abroad

You can sell through someone in India using a specific power of attorney for that sale. As with buying, it needs to be attested or apostilled abroad and stamped in India within the time allowed. Make sure it covers signing the sale deed, receiving payment into your account and dealing with the sub-registrar. Payment should come straight to your NRO account, not to the POA holder.

Owning property from abroad gets much easier once the yearly routine is set up. If you'd like help putting that routine in place, or planning a sale, an NRIVEST advisor is happy to chat.

Tax law changed significantly with the Income-tax Act, 2025 and continues to evolve. Please confirm the current rules with a qualified CA before you act.