Do I pay taxes for rental income deposited in my NRO account ?

POSTED BY smanjeet ON January 26, 2014 10:52 pm COMMENTS (7)

I am an NRI and have rented out my house in India. If I deposit the rent from tenants in my NRO account, do I have to pay any taxes in India? I don’t want to bring that money abroad, but want to use that money in India whenever I visit India.

7 replies on this article “Do I pay taxes for rental income deposited in my NRO account ?”

  1. ashalanshu says:

    Dear Smanjeet, there is no extra tax on the money parked by you in your NRO account. Yes if you earn any interest income from the parked amount in NRO account, the interest is subject to Tax @ 30%. Interestingly if your actual tax liability is less or zero, you can file Income Tax Return to claim back this TDS.

    Thanks

    Ashal

  2. smanjeet says:

    Ashal
    Do I have to pay some extra taxes if I keep my rental money in NRO account in comparison to a local account? I believe if I want to bring money overseas out of NRO account, I have to pay 30% taxes. However, if I want to use money within India, I don’t have to pay any extra taxes. Is that true?

  3. ashalanshu says:

    Dear Vijay, the rental income is taxable along with your any other Indian income. the usual slab rates ‘ll be applicable. Regarding your attempt to Tax evasion by not providing your PAN to your tenant, be ready to lose tenant in future. For few months, you may continue with this tactic but later on you w’d have to share your PAN as no tenant ‘ll come in your house with out your PAN as his own tax benefit on HRA is linked with your PAN.

    Thanks

    Ashal

  4. vijay says:

    Thanks Ashal for the information. Follow up question though – will he not be entitled to the 2 lac exemption limit and the subsequent slab rates? Furthermore, if the tenant doesn’t have a copy of the landlord’s PAN card, there would be no way to establish the income as coming from rental, isn’t it? Then it just will have to treated as any other source of income with the regular tax rules?

    [Any opportunity to outsmart the tax man is an interesting game to me…..not for saving tax per se, but to avoid throwing useful money down the political drain!]

  5. ashalanshu says:

    Dear Vijay, what you are doing from your rental income is secondary. Your rental income is taxable here. 🙂

    Thanks

    Ashal

  6. vijay says:

    I recall reading sometime back that it’s now permitted to transfer funds from NRO to NRE account. I haven’t tried it myself, but if it’s possible, wouldn’t it help to just do that? You NRE deposits (& FD in it) are tax exempt, at least in India.

  7. ashalanshu says:

    Dear Smanjeet, rental income is taxable. No matter it’s kept in an NRO account by you or some where else. Yes, you can claim property tax paid to municipal authorities from gross rent as well as standard deduction of 30% against the net rent (Gross – property tax). In case you are running any home loan on the said property, the interest paid on borrowed capital ‘ll also be available to set off from your net rental income.

    Thanks

    Ashal

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