Are you planning to rent a property from a landlord who is a non-resident Indian (NRI)? If you are, there are certain rules you need to be aware of. First and foremost, it is important to ensure that your landlord has appointed a representative in India who can act on his or her behalf in case of any legal or maintenance issues. Additionally, make sure you have a clear and detailed rental agreement in place that outlines the terms and conditions of your tenancy. This should include information on rent payments, security deposits, and any other fees or charges that may apply.
Adhil Shetty, CEO, Bankbazaar. com, says, “Anyone who pays rent must know the requirements if the landlord is an NRI. Simply paying rent on time may not be enough to comply with Indian income tax laws. You must also identify if your landlord qualifies as an NRI. There are many other obligations that you must fulfil, and failure to comply can result in monetary and legal consequences.”
It is also advisable to keep a record of all communication with your landlord and their representative, including emails, letters, and phone calls. These tips can be helpful ensuring your tenancy runs smoothly and that you are protected under Indian law. To ensure a smooth and respectful tenant-landlord relationship, here’s what you must do if your landlord is an NRI:
Deduct TDS on the rent
When you rent a property from an NRI landlord in India, you are required to deduct TDS on the rent you pay. The TDS rate for rental income of an NRI is 31.2%. You can deduct TDS by filing Form 16A with the Income Tax Department. You must deduct TDS as applicable, no matter the rent is paid via cash, cheque or any other mode to the NRI landlord.
Obtaining a TAN number
A TAN number is a tax deduction and collection account number that is required for deducting TDS on rent payments. You can apply for a TAN number online at the NSDL website.
Paying the TDS to the correct account
The rental proceeds must be paid to the NRI landlord’s NRO (Non-Resident Ordinary) account. An NRO account is a designated bank account tailored for NRIs to manage their Indian income, such as rent, dividends, and pensions. It allows NRIs to hold and manage earnings and investments in Indian rupees, while also facilitating easy repatriation of funds abroad.
You may have to pay the TDS even if the rent is paid in instalments. This is because the TDS is calculated on the total rent amount, not on the amount paid each month.
Shetty explains, “An NRO account offers a convenient platform for financial transactions and enables compliance with tax regulations. They are subject to specific rules and regulations, ensuring seamless management of income and expenses for NRIs while residing overseas.”
Issuing a TDS certificate
Within 15 days of the end of each quarter, you must issue a TDS certificate to the NRI landlord in Form 16A. This certificate will be used by the landlord to file income tax returns.
Paying the Rent on Time
This is probably the most important responsibility of a tenant. If you don’t pay your rent on time, you may be evicted from the property.
Taking care of the property
You are responsible for keeping the property in good condition and making any necessary repairs. You should also report any maintenance issues to the landlord promptly. You are responsible for any damage that you cause to the property. This includes damage to the walls, furniture, appliances, etc.
Rental Agreement
The rental agreement is a legally-binding contract between a tenant and a landlord. You must make sure that you follow all of the terms of the agreement. It is advisable to have all the terms and conditions incorporated in the agreement to avoid any dispute later.
Report Maintenance Issues
The landlord may not be able to visit the property as often as a local landlord. This means that you may have to be more proactive in reporting any maintenance issues. Don’t wait for the landlord to contact you if there is a problem with the property. Report any issues as soon as possible.
Keep Records of Communication
This includes the rental agreement, any maintenance requests, and any other communication with the landlord. This will help avoid any misunderstandings down the road.
Be Respectful
Last but not the least, this applies to both the tenant and the landlord to be respectful to each other. The landlord may not be able to respond to your requests immediately, especially if he is not living in India. Also, you must take care of the property and the rent agreement rules.
By maintaining open communication, adhering to the terms of the lease agreement, and showing consideration for your NRI landlord’s situation, you can create a positive and mutually-beneficial tenant-landlord relationship. Always ensure you follow local laws and regulations to ensure a smooth and legal tenancy experience.