What is the tax laibility of an NRI in case he gets rental income form properties in India?

What is the tax laibility of an NRI in case he gets rental income form properties in India?

Someone Asked on This blog

I am an NRI. I have invested in a property in India and expected to earn an income of Rs.45,000/- per month by way of rent.

1. What is my tax liability on this income?

2. What are the schemes available in India presently to save taxation on the above income?

If there is no other income of yours ,except the Rental income as stated in your query, tax liability shall be computed as below:

Gross Receipt Rs 45,000 x 12 = 5,40,000

Less

Deduction on account of Repair etc @ 30% 1,62,000

Taxable House property Income is 3,78,000

Tax (including Education Cess) on Rs 3,78,000 for FY 2006-07 shall be Rs 64,668

Please remember , No account for deduction has been taken while computing your liability to tax, including your age or sex which also effect your liability to tax in India.

As far as tax saving schemes are concerned , you can also save on tax by having some investments in ELSS (80CCB) or Pension schemes or having a fixed deposit of the income which you will receive from rent. But maximum saving is limited to Rs 1,00,000.Remember as per I T Act, the investments for claiming deduction u/s 80C or 80CCC must be your rental income .

Please remember that if the tenant is any person other than individual or HUF ,(Even Individual or HUF having turnover/receipts of 40 lacs /Rs 10,00,000 respectively will have to do TDS )the rental payment to you will have Tax Deducted at Source @ 30 % (15% for Resident individual ) under sec 195 of the I T Act whenever the rental shall be credited or paid to you. As such , there shall be Refund in your case.Thus , you are advised to apply before the Assessing Officer in Form 13 ,to issue a certificate directing the tenant to deduct the tax at lower rate .

Please remember that since you are an NRI , I do not have an idea about the country you live in and that is important. Please consult in your country of residence if the income earned n India is taxable in THAT country also.In that case , if DTAA is signed between India and that country and if there is any provision for rental taxation , relief under Section 90(2) of the I T Act can be claimed by you.