If you let a flat in India, you file two tax returns and report two different profits. India’s figure reflects a 30% deduction for maintenance, whether you spent ₹45,000 or nothing. Your country of residence ignores that allowance, counts what you actually spent, adds depreciation, and applies its own rules on interest. The profit abroad can be half of India’s figure or three times it.
The key trap: the 31.2% that your tenant withholds from rent is a payment on account, not the final tax. Only the tax you owe in India after all deductions is creditable abroad. If rent is your only Indian income, that’s often nil, and the tenant’s withholding is a refund waiting to happen.
Step 1: File in India by 31 July
| Item | Amount |
|---|
| Annual rent | ₹3,60,000 |
| Municipal tax paid | ₹15,000 |
| Repairs actually spent | ₹45,000 |
| Home-loan interest | ₹1,20,000 |
| Indian taxable income | ₹1,21,500 |
How India computes it:
Rent: ₹3,60,000 → less municipal tax: ₹15,000 = annual value ₹3,45,000 → less 30% deduction: ₹1,03,500 = ₹2,41,500 → less interest: ₹1,20,000 = ₹1,21,500. The repairs you paid don’t show up; the 30% covers them.
Your tenant withholds: 30% + 4% cess on gross rent = 31.2% of ₹3,60,000 = ₹1,12,320. This is far more than you’ll owe.
If this is your only Indian income: tax is nil, because ₹1,21,500 is below the basic exemption (₹2.5–4 lakh depending on the tax regime). You can reclaim the ₹1,12,320 by filing an ITR-2 by 31 July and claiming the refund.
If you have other Indian income: and the rent falls in the 30% slab, the tax is about ₹37,908. Still much less than ₹1,12,320, so you’re due a refund.
Either way, file in India. Without a return, the withholding stays withheld.
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Step 2: File in your country’s tax return
Your country works out a new profit using its own rules. Here’s how the five largest NRI destinations handle it.
UK: ₹3,00,000 profit
Deductions: actual repairs (₹45,000) and municipal tax (₹15,000) count. Interest on a residential mortgage is not deducted; instead you get a 20% tax reduction on the interest amount itself.
Depreciation: none. The building doesn’t get an allowance.
Your UK profit: ₹3,60,000 − 45,000 − 15,000 = ₹3,00,000. Interest saves you 20% × ₹1,20,000 = ₹24,000 in UK tax.
DTAA relief: the 1993 treaty lets India tax the rent. UK gives you credit for Indian tax, capped at UK tax on that same income. If India taxes you at ₹37,908, and UK tax is £298, the credit wipes out most of the UK bill.
Filing: go on the foreign pages of your Self Assessment, and from April 2026, you must file quarterly if property income is over £50,000.
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US: ₹30,000 profit
Deductions: repairs and municipal tax count. Interest is fully deductible.
Depreciation: mandatory, using the alternative depreciation system. A residential building is 30 years straight-line. Building cost ₹45 lakh ÷ 30 = ₹1,50,000 a year.
Your US profit: 3,60,000 − 45,000 − 15,000 − 1,20,000 − 1,50,000 = ₹30,000 (about US$313).
DTAA relief: credit on Form 1116, limited to US tax on that income. If India taxes the rent at ₹37,908 (about US$395), and US tax is about US$69, you use the US$69 now and carry the rest forward 10 years or back 1 year.
Filing: Schedule E, due 15 April. Rental losses are capped at US$25,000 a year if you actively manage the property, phasing out above US$100,000 income.
Get US tax help →
Canada: ₹1,80,000 profit
Deductions: repairs, municipal tax, and interest all count fully.
Depreciation: optional, 4% declining balance (Class 1). Let’s assume you don’t claim it.
Your Canadian profit: 3,60,000 − 45,000 − 15,000 − 1,20,000 = ₹1,80,000 (about C$2,647).
DTAA relief: Indian tax is deducted from Canadian tax, capped at Canadian tax on net income from India. The 15% limit on some foreign investment income does not apply to rent from real property.
Filing: Form T776, calendar year. Form T1135 is due if the property cost over C$100,000 at any point in the year.
UAE: ₹0 (no income tax)
No personal income tax. Rent from foreign property is not taxed in the UAE, period.
Filing: you still need an Indian return to recover the withholding. No UAE filing is needed.
DTAA relief: under the India–UAE treaty, an individual counts as a UAE resident only after 183 days in the calendar year.
Singapore: ₹0 (no income tax)
Foreign rental income is exempt for resident individuals. The rent is not taxed in Singapore.
Filing: again, file in India to reclaim the withholding. No Singapore filing is needed.
DTAA relief: not relevant, since Singapore doesn’t tax it.
The comparison: what each country lets you deduct
| Country | Repairs | Municipal tax | Interest | Building depreciation | Net profit on the flat |
|---|
| India | No (covered by 30%) | Yes | Yes, unlimited | No | ₹1,21,500 |
| UK | Yes | Yes | 20% reduction only | No | ₹3,00,000 |
| US | Yes | Yes | Yes | Compulsory, 30-year | ₹30,000 |
| Canada | Yes | Yes | Yes | Optional, 4% | ₹1,80,000 |
| UAE | n/a | n/a | n/a | n/a | Not taxed |
| Singapore | n/a | n/a | n/a | n/a | Not taxed |
The relief trap: only final Indian tax counts
The tenant withheld ₹1,12,320. India allows you to reclaim most or all of it through your return. Only the amount of tax India ultimately assesses you for can be credited abroad.
If rent is your only Indian income: Indian tax is nil, credit abroad is nil. The ₹1,12,320 comes back only from India.
If India taxes you at ₹37,908: that’s what you credit abroad. The remaining ₹74,412 of withholding is a refund from India.
This means:
- File your Indian return and claim the refund promptly.
- Don’t assume the UK, US or Canada will credit the ₹1,12,320. They won’t. They credit only what India actually taxes you for.
- The DTAA relief works after both countries have worked out their tax. It then reduces your home-country bill by the Indian amount, up to the home-country tax on the same income.
Five mistakes that cost NRI landlords money
Carrying India’s ₹1,21,500 into the home return. Your country of residence doesn’t recognise the 30% deduction and will ignore this figure.
Treating the withholding as final tax. It’s not. Only the amount India assesses you for can be credited abroad.
Filing only in your home country. No Indian return = no refund. The withholding stays with the revenue.
Forgetting the different tax years. India’s year is April–March; the UK, Canada, Germany and the Netherlands use the calendar year; Australia runs July–June. Tax often straddles two home-country years.
Not claiming the lower deduction certificate (Form 128) before the year starts. If you know your tax will be low, apply in advance so the tenant withholds closer to what you’ll owe.
Your checklist each year
This article is general information for NRI landlords, not tax advice. Rules change, and the computation depends on your circumstances and your specific country’s laws. File with a qualified adviser in both India and your country of residence.
