Tax Query: Is the rental income of an NRI subject to TDS?

I am a resident of India. I, along with my wife, receive rent from a property jointly owned by us. As part of my employment, I am working outside India from 1 February 2020. I will remain outside India for the whole of FY 2020-21. Presently, I receive the rent without a TDS. Will there be any change in tax on my rental income if I become an NRI?

At present, there is no TDS on the rental income you and wife receive. The rental income is taxed in the ratio of the co-ownership while filing your income tax returns. From FY 2020-21, you become an NRI if you do not satisfy any of the below conditions;

1. Your stay in India is for a minimum period of 182 days.
2. Your stay in India is for a minimum period of 60 days during the year a minimum of 365 days during the four years immediately preceding the previous year.

Once you become an NRI, your tenant should deduct tax at 31.2% on the rent share due to you. There is no TDS liability on your wife’s share of the rental income. However, if your aggregate income in India during the FY 2020-21 is below the taxable limit of Rs 2,50,000, you can obtain a nil TDS certificate obtained from your jurisdictional income tax officer. You can get a nil TDS certificate by applying along with the required documents. 

Apart from the TDS liability on your rental income, you should also file your income tax return in India for the FY 2020-21 in July 2021.

Also Read: Tax Query: What will be the TDS rate for payment to professionals after 14 May?

I am a non-resident Indian. I own a property in India and plan to sell it to a resident buyer in FY 2020-21. What are the tax implications of the sale of property in India?

The sale of a property in India is taxable in India. The property sale is also liable for a TDS on the capital gains arising from the sale of the property. The buyer should deduct the TDS and deposit with the government. 

In a case, the holding period of the property is two years or less than two years, the capital gains are short-term capital gains and taxed as per the income slab rates. In the case of holding more than two years, the gains are long-term capital gains and taxed at 20%, plus surcharge if applicable. 

The buyer should deduct TDS and make the remittance to the NRI. The buyer is required to furnish Form 15CA after obtaining a certificate from a Chartered Accountant in Form 15CB. The NRI can also claim a capital gains exemption upon investment in a property or bonds in India. The NRI should report and file an income tax return due in July 2021.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in