A Complete Guide for 2025

Introduction

With the rising popularity of crypto trading and virtual digital assets (VDAs), the Indian government has implemented a structured tax regime for cryptocurrencies. As of 2025, taxpayers in India must comply with specific rules for disclosing, calculating, and paying taxes on income derived from cryptocurrencies and other VDAs. In this article, we will discuss how cryptocurrency is taxed in India, including capital gains, P2P crypto tax, and updates for Crypto Tax in India 2025.

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Taxation of Virtual Digital Assets (VDAs) in India

The Finance Act, 2022, introduced a new framework for taxing income from VDAs, which includes:

• Cryptocurrencies (like Bitcoin, Ethereum)

• NFTs (Non-Fungible Tokens)

• Any other digital asset as notified by the government

Key Provisions:

1. Flat Tax Rate of 30% on profits from the transfer of VDAs.

2. 1% TDS (Tax Deducted at Source) on all transactions above a specified threshold.

3. No deduction for expenses (except cost of acquisition).

4. No set-off of losses from VDA against other income or future crypto gains.

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How to Calculate Tax on Cryptocurrency in India

Step 1: Identify the Transaction

• Selling crypto for INR

• Swapping one crypto for another

• Using crypto for purchases

• Receiving crypto as payment or mining rewards

Step 2: Determine Income

Use this formula for each transaction:

Taxable Income = Sale Value – Purchase Cost

No deduction is allowed for transaction fees, platform charges, or mining costs.

Step 3: Apply 30% Tax Rate

Example:
If you bought Bitcoin for ₹1,00,000 and sold it for ₹1,50,000:
Profit = ₹50,000 → Tax = ₹15,000 (30%)

Step 4: Deduct TDS

A 1% TDS is deducted at source if the annual transaction volume exceeds ₹10,000 (₹50,000 for specified persons). This TDS can be adjusted while filing your Income Tax Return (ITR).

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P2P Crypto Tax in India

Peer-to-peer (P2P) crypto transactions are also taxable. Since these bypass centralized exchanges, the responsibility to deduct TDS and report income lies entirely with the buyer/seller.

Points to Remember:

• Keep a detailed record of wallet addresses and transaction history.

• Even unregulated exchanges and wallet-based trades are tracked via KYC and crypto analytics tools used by tax authorities.

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Crypto Capital Gains Tax in India

Crypto profits are not taxed like stocks or mutual funds. Here’s how it differs:

Even gifting or transferring crypto to others may be considered a transfer and taxed accordingly.

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Crypto Tax in India 2025: Latest Updates

As of FY 2024-25 (AY 2025-26), the following remain applicable:

• No changes in the 30% tax or 1% TDS regime.

• Crypto platforms must issue Form 16A for TDS deduction on crypto transactions.

• Reporting of crypto in Schedule VDA in ITR is mandatory for individuals, even for small trades.

The government continues to refine tax enforcement on crypto with better data integration from exchanges, wallet addresses, and foreign trading platforms.

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Filing Crypto Income in ITR

• Use ITR-2 or ITR-3, depending on other sources of income.

• Disclose income from VDA under the “Income from Other Sources” or “Capital Gains” section.

• Report all crypto-related transactions in Schedule VDA.

• Adjust 1% TDS in TDS Schedule while filing.

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Why You Should Consult a Professional

Cryptocurrency tax in India involves complexities like exchange conversions, P2P trade records, and form filing. Consult a CA for Income Tax Filing, especially if:

• You traded on foreign platforms

• You had high-volume trades or losses

• You received airdrops, mining income, or crypto payments

• You require a CA Report for VISA or NRI disclosures

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FAQs on Cryptocurrency Tax in India

1. Is cryptocurrency legal in India?

Crypto is not illegal, but it is unregulated. However, it is fully taxable.

2. How much is the tax on crypto in India?

A flat 30% tax is levied on gains from cryptocurrency, regardless of income level.

3. Is crypto trading on foreign exchanges taxed?

Yes. Income must be disclosed, and 1% TDS is applicable if the transaction is routed via an Indian exchange or platform.

4. Can I adjust crypto losses against other income?

No. Crypto losses cannot be set off against any income, including crypto gains in another year.

5. Do I have to pay tax on airdrops and mining rewards?

Yes. These are considered income and taxed at the applicable slab rate in the year received.

6. Which ITR form should I use to report crypto?

Usually ITR-2 or ITR-3, based on the nature of income and business activities.

7. Do I need to show my wallet transactions?

Yes, especially in the case of P2P or foreign transactions. The IT Department may ask for logs, wallet IDs, or exchange records.

8. How is TDS applied on crypto trades?

TDS of 1% is deducted at source on transactions above ₹10,000. This is deducted by the exchange or buyer.

9. Is gifting cryptocurrency taxable?

Yes. Gifts in excess of ₹50,000 in a financial year are taxable unless received from a relative.

10. Can NRIs be taxed on crypto income in India?

Yes, if the income accrues or arises in India or is received in India.

Contact Us for Expert Assistance

Navigating the complexities of cryptocurrency taxation in India requires expert guidance. Whether you’re filing your first crypto return, calculating P2P gains, or managing capital gains from multiple exchanges, our team is here to help.

You can get in touch with N C Agrawal & Associates, your trusted CA for Income Tax Filing, CA for NRI Tax Filing, and CA for Cryptocurrency Tax Filing at:

📞 +91 9718046555
📧 info@ncagrawal.com

Let us assist you in filing your taxes accurately and compliantly.

Updated on 28th December 2025

Introduction

With increasing global income and foreign investments, Indian taxpayers are required to be more transparent about their foreign assets and income. The Income Tax Act, 1961, mandates disclosure of foreign assets in the Income Tax Return (ITR) under Schedule FA. Non-disclosure can lead to severe penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

In this guide, we will explain everything about foreign asset disclosure in ITR, its applicability, the schedule FA, and the consequences of non-disclosure.

Why This Topic Is Critical Right Now

The Income Tax Department has significantly tightened monitoring of foreign assets and foreign income. Taxpayers are now receiving emails, SMS alerts, and compliance nudges asking them to disclose overseas assets correctly.

This is happening because India receives financial information from foreign jurisdictions under global data-sharing arrangements. If your ITR does not match this data, it can trigger scrutiny, penalty, or prosecution.

For AY 2025–26, taxpayers have been specifically advised to correct omissions by filing a revised return on or before 31 December 202

 

What is Foreign Asset Disclosure in ITR?

Foreign asset disclosure refers to reporting details of overseas assets and income held by a resident Indian taxpayer in their annual income tax return. This includes foreign bank accounts, properties, financial interests, trusts, and more.

Foreign Asset Disclosure in ITR: Applicability

Who is required to disclose foreign assets in ITR?

• Resident and Ordinarily Resident (ROR) individuals in India are required to disclose foreign assets.
• Non-Resident (NR) and Resident but Not Ordinarily Resident (RNOR) individuals are not required to disclose foreign assets.

Note: Disclosure is mandatory even if the asset does not generate any income during the year.

From which year is Foreign Asset Disclosure in ITR mandatory?

The requirement for foreign asset disclosure in the ITR started from Assessment Year 2012-13 (FY 2011-12). It became more stringent with the introduction of the Black Money Act in 2015.

Types of Foreign Assets to be Disclosed in Schedule FA

Schedule FA is a detailed section in the ITR form that captures information on:

1. Foreign Bank Accounts – Including savings, current, or term deposits.
2. Financial Interests – Shares, securities, bonds held in foreign companies or entities.
3. Immovable Property – Real estate or buildings situated abroad.
4. Trusts – Details of foreign trusts where the taxpayer is a trustee, beneficiary, or settlor.
5. Any other capital asset – Such as artwork, jewelry, etc., held abroad.
6. Signing Authority – If the taxpayer has authority in any foreign account.

Salaried employees receiving shares of the foreign holding company under ESOPs or RSUs must also disclose such holdings even if no income is generated.

If such shares are sold, the gains must be reported in ITR and capital gains tax must be paid accordingly. Even if the shares are vested but not sold, Schedule FA disclosure is still mandatory.

How to Fill Schedule FA in ITR

Step-by-Step Instructions:

1. Select the correct ITR Form – Usually ITR-2 or ITR-3 is applicable for those disclosing foreign assets.
2. Navigate to Schedule FA – Available in the ITR form after logging into the Income Tax e-filing portal.
3. Provide Year of Acquisition – Mention the year the foreign asset was acquired.
4. Country Details – Mention the country of location.
5. Nature of Asset/Account – Indicate whether it is a bank account, property, or financial interest.
6. Income Generated – Specify if any income was derived from the foreign asset.
7. Tax Details – Mention if the income was taxed in the foreign country.

Pro Tip: Keep documents like foreign bank statements, investment records, and property details handy while filing.

Schedule FA Explained – Step-by-Step

Schedule FA (Foreign Assets) is where detailed disclosure is made.

For each foreign asset, you must report:

1. Type of asset
   (bank account, shares, property, trust interest, signing authority, etc.)

2. Country of location

3. Date of acquisition

4. Asset values

   • Opening balance

   • Highest balance during the year

   • Closing balance
     (both in foreign currency and INR)

5. Income earned from the asset
   If income is earned, it must also be reported in Schedule FSI.

6. Conversion into INR
   Values must be converted using prescribed exchange rates

Penalty for Non-disclosure of Foreign Assets in Income Tax Return

The Black Money Act, 2015 prescribes heavy penalties:

• Penalty of INR 10 lakh per undisclosed foreign asset.
• Prosecution for up to 7 years.
• Additional taxes and interest may be levied.

Even if the foreign asset did not generate income, non-disclosure invites penalties.

How does the government identify undisclosed foreign assets?

• India has signed Information Exchange Agreements with many countries under FATCA and CRS.
• Foreign banks and institutions share details of accounts held by Indian residents.
• Data analytics and AI-based red flagging systems are used by the Income Tax Department.
• Cross-verification of foreign income declarations with Form 67, Form 26AS, and passport data.

Practical Examples

Example 1:
An employee receives RSUs from a US-based employer. Even if shares are not sold, they must be reported every year in Schedule FA.

Example 2:
A foreign brokerage account with no trading activity still requires disclosure.

Example 3:
Foreign dividend income must be reported in Schedule FSI, and DTAA relief claimed separately.

Revised Return Deadline (AY 2025–26)

If foreign assets or foreign income were missed earlier, you can correct it by filing a revised return.

📅 Last date to revise ITR for AY 2025–26: 31 December 2025

Missing this deadline can expose you to penalty and scrutiny proceedings.

FAQs on Foreign Asset Disclosure in ITR

1. Do NRIs need to disclose foreign assets in Indian ITR?

No. Only Resident and Ordinarily Resident (ROR) individuals need to disclose foreign assets in India.

2. What if I had a foreign asset but no income from it?

Disclosure is still mandatory even if no income is earned from the asset.

3. Which ITR forms allow foreign asset disclosure?

Primarily ITR-2 and ITR-3 contain Schedule FA for foreign asset reporting.

4. Is disclosure required for jointly held foreign assets?

Yes. If you are a joint holder or have signing authority, it must be disclosed.

5. Can I revise my return if I forgot to disclose?

Yes. If discovered early, file a revised return before the due date.

6. What documents are needed to fill Schedule FA?

Foreign bank statements, property documents, and investment proof should be retained.

7. Is the value of the foreign asset required in INR?

Yes, values should be converted and reported in Indian Rupees.

8. What if I disclosed foreign income but forgot the asset?

Both income and asset disclosure is mandatory. Partial disclosure is considered non-compliant.

9. Is a CA’s help mandatory for filing Schedule FA?

Not mandatory, but highly recommended due to complexity.

10. I received RSUs from my US employer. Should I disclose them?

Yes, even if they are not sold. Holding or vesting of foreign shares must be reported in Schedule FA. On sale, capital gains must be disclosed and taxed in India.

Conclusion

Foreign asset disclosure in ITR is a critical compliance requirement for Indian residents with overseas income or assets. It ensures transparency and helps avoid harsh penalties under Indian tax laws. If you need expert help, consult a CA for NRI Tax Filing, CA for Income Tax Filing, or CA near me for ITR filing to ensure your Schedule FA is accurate and compliant.

In recent times, many so-called “finfluencers” and “fraudcasters” have been spreading a misleading narrative about taxation. According to them, if your taxable income exceeds ₹12,00,000—even by ₹1—you will lose the rebate and suddenly have to pay ₹62,400+ in taxes. This claim sounds alarming, but it is entirely false.

The above myths emerged immediately after the Budget 2025 without proper interpretation. The summary of personal taxes slabs as per Budget 2025 can be read by clicking here.

Thankfully, the Income Tax Act provides for Marginal Relief, ensuring that an additional ₹1 in income does not create an unfair tax burden. Let’s break this down in simple terms.

The Finfluencer & Fraudcast Myth

They claim that if your income is ₹12,00,001, your tax liability will jump to ₹62,400+. The idea of suddenly losing the rebate sounds frightening and discouraging for taxpayers. However, this is a misinterpretation of tax laws and how rebates work under the new tax regime.

The Truth: Marginal Relief Applies

Under the new tax regime, taxpayers earning up to ₹12,00,000 get a rebate under Section 87A, effectively making their tax liability zero. But what happens if your income is ₹12,00,001?

Instead of immediately paying ₹62,400+ in tax, Marginal Relief ensures that you pay only ₹1 in tax!

Yes, you read that right! If your taxable income is just ₹1 above ₹12,00,000, you will not face a sudden, steep tax burden. Instead, the tax amount is adjusted in such a way that you only pay the additional tax corresponding to the extra income.

What Is the Maximum Income for Marginal Relief?

Marginal relief is available until your income reaches approximately ₹12,73,934.

• If your taxable income is between ₹12,00,001 and ₹12,73,934, marginal relief ensures you only pay tax on the excess amount above ₹12,00,000.
• Once your income exceeds ₹12,73,934, the tax liability surpasses the additional income over ₹12,00,000, and marginal relief no longer applies.

Key Takeaways

✅ Marginal Relief exists to prevent unfair tax jumps.
✅ If your taxable income is between ₹12,00,001 and ₹12,73,934, tax is adjusted fairly.
✅ You do NOT suddenly lose all benefits or pay ₹62,400+ in tax for earning ₹1 more.
✅ Don’t believe misleading financial myths—always check official tax laws!

Frequently Asked Questions (FAQs)

1. What is Marginal Relief?

Marginal Relief is a provision in the Income Tax Act that ensures taxpayers do not face a sudden jump in tax liability when their taxable income slightly exceeds ₹12,00,000 under the new tax regime.

2. How does Marginal Relief work?

If your taxable income exceeds ₹12,00,000 by a small margin, Marginal Relief ensures that you only pay tax on the excess amount instead of facing a sudden, steep tax liability.

3. Does Marginal Relief apply to all taxpayers?

Marginal Relief applies to taxpayers under the new tax regime whose taxable income is between ₹12,00,001 and ₹12,73,934.

4. What happens if my income exceeds ₹12,73,934?

If your taxable income crosses ₹12,73,934, your tax liability exceeds the additional income over ₹12,00,000, and Marginal Relief no longer applies.

5. Is it true that earning ₹1 more than ₹12,00,000 leads to ₹62,400+ in taxes?

No, this is a myth. Marginal Relief prevents such an unfair tax burden. If your income is ₹12,00,001, your actual tax liability is just ₹1, not ₹62,400+.

6. How can I ensure I am calculating my tax correctly?

It is always best to consult a qualified Chartered Accountant (CA) to understand your tax liability and Marginal Relief calculations accurately.

7. Where can I get more reliable tax information?

Always refer to official government resources or consult a professional CA instead of relying on misinformation spread by unverified sources online.

Final Thoughts

The idea that a ₹1 increase in taxable income can create a huge tax burden is a misconception spread by those who don’t understand taxation properly. Marginal relief is a critical feature in our tax system that ensures fairness and prevents sudden financial shocks. So, the next time someone tells you that earning slightly more will lead to a massive tax jump, you’ll know the truth!

For professional tax guidance, always consult a qualified Chartered Accountant (CA) instead of relying on misleading online advice!

 

 

 

 

The Finance Bill, 2025, has introduced changes in personal income tax rates for the Assessment Year (AY) 2026-27. This article provides a detailed overview of the tax slabs under both the new tax regime (default) and the old tax regime (optional) while comparing tax liabilities at different income levels.

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Personal Income Tax Rates for AY 2026-27

New Tax Regime (Default) – Section 115BAC

Total Income (₹)	Tax Rate
Upto ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

• Health & Education Cess: 4% applies to the total tax liability.
• Surcharge: Additional tax for income exceeding ₹50 lakh.
• No deductions or exemptions allowed.

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Old Tax Regime (Optional) – No Change in Rates

Category	Income up to ₹2.5L	₹2.5L – ₹5L	₹5L – ₹10L	Above ₹10L
Individuals (<60 yrs)	Nil	5%	20%	30%
Senior Citizens (60-79 yrs)	Nil (₹3L limit)	5%	20%	30%
Super Senior Citizens (80+ yrs)	Nil (₹5L limit)	–	20%	30%

• Rebate under Section 87A: Available for income up to ₹5 lakh (maximum rebate ₹12,500).
• Allows deductions under 80C, 80D, HRA, LTA, etc.

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Comparison of Tax Liability under Both Regimes

To understand the impact of these tax rates, let’s compare tax liability for incomes of ₹20 lakh, ₹30 lakh, and ₹40 lakh under both regimes.

Tax Calculation for Different Income Levels

Total Income (₹)	New Regime (₹)	Old Regime (₹) (After ₹2L deductions)
₹20,00,000	₹2,08,000	₹3,66,600
₹30,00,000	₹4,99,200	₹6,78,600
₹40,00,000	₹8,11,200	₹9,90,600

Tax Breakdown for ₹20,00,000

✅ New Regime:

• Tax on first ₹4,00,000 – Nil
• ₹4,00,001 – ₹8,00,000 @ 5% = ₹20,000
• ₹8,00,001 – ₹12,00,000 @ 10% = ₹40,000
• ₹12,00,001 – ₹16,00,000 @ 15% = ₹60,000
• ₹16,00,001 – ₹20,00,000 @ 20% = ₹80,000
• Total Tax = ₹2,00,000 + 4% Cess (₹8,000) = ₹2,08,000

✅ Old Regime (After ₹2L Deductions – Net Income ₹18,00,000):

• ₹2.5L – ₹5L @ 5% = ₹12,500
• ₹5L – ₹10L @ 20% = ₹1,00,000
• ₹10L – ₹18L @ 30% = ₹2,40,000
• Total Tax = ₹3,52,500 + 4% Cess (₹14,100) = ₹3,66,600

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Disclaimer:

This article is for informational purposes only and should not be considered as professional tax advice. While every effort has been made to ensure accuracy, tax laws are subject to change, and individual circumstances may vary. Readers are advised to consult with a qualified Chartered Accountant or tax professional before making any tax-related decisions. The author and publisher disclaim any liability for any decisions made based on the content of this article.

 

Here’s a table of the new TDS rates as per the Finance Bill, 2025:

Section	Nature of Payment	Current TDS Rate	Proposed TDS Rate
194D	Insurance Commission	5%	2%
194LBC	Income from Securitisation Trust	25% (Individuals/HUF), 30% (Others)	10% (for all)
194LBA	Income from Business Trust	No change	No change
193	Interest on Securities	No threshold	Exempt up to ₹10,000
194A	Interest (other than on securities)	₹40,000 (General) / ₹50,000 (Senior Citizens)	₹50,000 (General) / ₹1,00,000 (Senior Citizens)
194B	Winnings from Lottery	₹10,000 aggregate in FY	₹10,000 per transaction
194BB	Winnings from Horse Race	₹10,000 aggregate in FY	₹10,000 per transaction
194G	Commission on Lottery	₹15,000	₹20,000
194H	Commission/Brokerage	₹15,000	₹20,000
194-I	Rent	₹2,40,000 per FY	₹50,000 per month
194J	Professional/Technical Fees	₹30,000	₹50,000
194LA	Compensation for Land Acquisition	₹2,50,000	₹5,00,000

These changes will be effective from April 1, 2025 or any date as notified by the goverment

Introduction

Tax Deducted at Source (TDS) on rent paid to a Non-Resident Indian (NRI) landlord is governed by Section 195 of the Income Tax Act, 1961. If you are paying rent to an NRI landlord, it is essential to comply with TDS deduction regulations to avoid penalties. This article explains the applicable TDS rate, lower TDS deduction process, Form 15CA & 15CB requirements, determination of NRI status, impact of DTAA, Budget 2017 amendments, and consequences of non-compliance, with an example for clarity.

How to Determine Whether a Landlord is an NRI

Before deducting TDS, the tenant must verify if the landlord qualifies as an NRI under the Income Tax Act, 1961. A landlord is considered an NRI if:

1. Stay in India: The landlord stays in India for less than 182 days in the relevant financial year.
2. Past Stay Record: If the landlord was in India for less than 365 days in the preceding four years and less than 60 days in the current financial year, they are considered an NRI.
3. Self-Declaration: In some cases, the landlord can provide a self-declaration (Along with CA Certificate) stating their residential status, which the tenant can verify with relevant documents (passport, visa, or foreign address proof).

If the landlord is an NRI, the tenant must deduct TDS under Section 195, rather than Section 194I applicable to resident landlords.

TDS Rate on Rent Paid to NRI

As per Section 195, the applicable TDS rate on rent paid to an NRI is 30% (plus applicable surcharge & cess) on the gross rent amount. Unlike resident landlords, where TDS is deducted at 10% under Section 194I, rent paid to an NRI is subject to a higher rate.

Impact of DTAA (Double Taxation Avoidance Agreement)

If the NRI landlord resides in a country that has a DTAA (Double Taxation Avoidance Agreement) with India, they may be eligible for a lower TDS rate. The landlord can claim DTAA benefits by:

1. Providing a Tax Residency Certificate (TRC) from their country of residence.
2. Furnishing Form 10F and a self-declaration stating they are eligible for DTAA benefits.
3. Ensuring compliance with Section 90/90A of the Income Tax Act for DTAA applicability.

For example, under DTAA with the USA, the TDS rate may be reduced to 15% instead of 30%, depending on the agreement terms.

Example of TDS on Rent to NRI

Assume Mr. Sharma, an Indian resident, is paying a monthly rent of ₹1,00,000 to his NRI landlord.

• TDS Calculation: ₹1,00,000 × 30% = ₹30,000
• Monthly payment after TDS deduction: ₹1,00,000 – ₹30,000 = ₹70,000
• The deducted TDS of ₹30,000 must be deposited with the Income Tax Department.

If DTAA applies and the TDS rate is 15%, then:

• TDS Calculation: ₹1,00,000 × 15% = ₹15,000
• Monthly payment after TDS deduction: ₹1,00,000 – ₹15,000 = ₹85,000

Lower TDS Deduction Process

If the NRI landlord’s actual tax liability is lower than the 30% TDS rate, they can apply for a Lower Deduction Certificate (LDC) from the Income Tax Department. Here’s how:

1. Application by NRI Landlord: The landlord must apply for a lower deduction certificate (Form 13) from the Assessing Officer (AO).
2. Certificate Issuance: The AO reviews the landlord’s tax liabilities and issues the certificate specifying a reduced TDS rate.
3. Tenant’s Compliance: The tenant can deduct TDS at the lower rate mentioned in the certificate.

Form 15CA & 15CB Requirements

For any payment made to an NRI, compliance with Form 15CA & 15CB is mandatory before remittance:

1. Form 15CA: A declaration by the payer (tenant) to be submitted online before making the remittance to an NRI landlord.
2. Form 15CB: A certificate issued by a Chartered Accountant (CA) certifying that the tax deduction is in compliance with the Income Tax Act.
3. Submission: If the remittance exceeds ₹5,00,000 in a financial year, both Form 15CA & 15CB are required. Otherwise, only Form 15CA is sufficient for smaller amounts.

Budget 2017 Amendment Impact

Budget 2017 introduced stringent compliance measures for TDS on payments made to NRIs, emphasizing stricter enforcement of Form 15CA & 15CB. The following changes were made:

1. Expanded scope of TDS deduction: TDS compliance for rental payments to NRIs is closely monitored, making it necessary for tenants to deduct and deposit TDS accurately.
2. Strengthened penalties: Non-deduction or non-payment of TDS now attracts higher interest rates and penalties.

Consequences of Not Deducting TDS on NRI Rent

Failure to deduct or deposit TDS can lead to serious tax implications, including:

• Interest on Late Deduction/Deposit:
  • 1% per month for failure to deduct TDS.
  • 1.5% per month for failure to deposit TDS after deduction.
• Penalty Under Section 271C: The tenant may be liable to pay an equivalent amount as a penalty.
• Disallowance of Rent Expense: If TDS is not deducted, the rent paid may be disallowed as a business expense for tax purposes.
• Tenant in Default: If the tenant fails to deduct and deposit TDS, they will be considered a “defaulter” and held liable for the unpaid tax amount, along with penalties and interest.

Conclusion

Compliance with TDS on rent paid to NRI landlords is crucial to avoid penalties and legal issues. If you are unsure about tax deductions or need assistance with a lower TDS application, consult N C Agrawal& Associates, CA in Delhi and Noida to ensure seamless compliance.

You can also read our Article on TDS applicabilty on sale of property by NRI by clicking here

For expert advice, reach out to N C Agrawal & Associates, offering specialized tax and compliance services for residents and NRIs.

Tax Deducted at Source (TDS) is a mechanism by which the government collects tax at the source of income. The payer deducts a certain percentage of the payment as tax and remits it to the government on behalf of the payee. The TDS rates and applicable sections under the Income Tax Act for the Financial Year (FY) 2024-25 (Assessment Year 2025-26) are outlined below:

TDS Rate Chart for FY 2024-25 (AY 2025-26):

Section	Nature of Payment	Threshold Limit (₹)	TDS Rate (%)	Effective Date
192	Salary	As per income tax slab rates	As per slab rates	–
192A	Premature withdrawal from EPF	₹50,000	10%	–
193	Interest on securities	₹10,000	10%	–
194	Dividend	₹5,000	10%	–
194A	Interest other than on securities	₹40,000 (₹50,000 for senior citizens)	10%	–
194B	Winnings from lotteries, crossword puzzles, etc.	₹10,000	30%	–
194BA	Winnings from online games	No threshold	30%	–
194BB	Winnings from horse races	₹10,000	30%	–
194C	Payment to contractors/sub-contractors (single transaction)	₹30,000	1% (Individual/HUF), 2% (Others)	–
194C	Payment to contractors/sub-contractors (aggregate in FY)	₹1,00,000	1% (Individual/HUF), 2% (Others)	–
194D	Insurance commission	₹15,000	5%	–
194DA	Payment in respect of life insurance policy	₹1,00,000	5%	–
194EE	Payments from National Savings Scheme	₹2,500	10%	–
194F	Payments on account of repurchase of units by Mutual Fund or Unit Trust of India	No threshold	20%	Up to 30-09-2024
194F	Omitted	–	–	From 01-10-2024
194G	Commission on sale of lottery tickets	₹15,000	5%	–
194H	Commission or brokerage	₹15,000	5%	Up to 30-09-2024
194H	Commission or brokerage	₹15,000	2%	From 01-10-2024
194I(a)	Rent for plant and machinery	₹2,40,000	2%	–
194I(b)	Rent for land, building, furniture, etc.	₹2,40,000	10%	Up to 30-09-2024
194I(b)	Rent for land, building, furniture, etc.	₹2,40,000	2%	From 01-10-2024
194IA	Payment on transfer of certain immovable property other than agricultural land	₹50,00,000	1%	–
194IB	Payment of rent by certain individuals or HUF	₹50,000 per month	5%	Up to 30-09-2024
194IB	Payment of rent by certain individuals or HUF	₹50,000 per month	2%	From 01-10-2024
194IC	Payment under specified agreement	No threshold	10%	–
194M	Payment of certain sums by certain individuals or HUF	₹50,00,000	5%	Up to 30-09-2024
194M	Payment of certain sums by certain individuals or HUF	₹50,00,000	2%	From 01-10-2024
194O	Payment of certain sums by e-commerce operator to e-commerce participant	₹5,00,000	1%	Up to 30-09-2024
194O	Payment of certain sums by e-commerce operator to e-commerce participant	₹5,00,000	0.1%	From 01-10-2024

Key Changes Effective from 1st October 2024:

• Section 194H (Commission or Brokerage): TDS rate reduced from 5% to 2%.
• Section 194IB (Rent by Individuals or HUF): TDS rate reduced from 5% to 2%.
• Section 194M (Payments by Individuals or HUF): TDS rate reduced from 5% to 2%.
• Section 194O (E-commerce Transactions): TDS rate reduced from 1% to 0.1%.
• Section 194F (Repurchase of Units by Mutual Funds or UTI): This section has been omitted.

These changes aim to simplify tax compliance and reduce the burden on taxpayers. It’s essential to stay updated with these modifications to ensure accurate TDS deductions and adherence to tax regulations.

if you further need to study the detail about TDS deposit dates and tds return filing process, the same can be read at TDS Deposit dates and Return Filing

Last Updated on 7th January 2026

When purchasing property from a Non-Resident Indian (NRI) seller, the buyer is required to deduct Tax Deducted at Source (TDS) on the sale amount. The TDS rate and procedures are different compared to transactions involving resident sellers. Here’s a breakdown of the process:

1. TDS Rate for NRI Seller

• Standard Rate: TDS is typically deducted at a rate of 12.5% plus applicable surcharge and cess on the total sale consideration if the property is classified as a long-term capital asset (held for more than 2 years). Please note that indexation benefit is not available to NRI Sellers of the property.
• Short-Term Capital Gains: If the property is held for less than 2 years, the TDS rate is 30% plus applicable surcharge and cess.
• Important Note: These rates are subject to change as per the Finance Act. Ensure you verify the latest rates.

2. Procedure for Deducting TDS

• Obtain TAN: The buyer must obtain a Tax Deduction and Collection Account Number (TAN) before deducting TDS.
• Deduction of TDS: TDS should be deducted at the time of making the payment to the NRI seller, whether in advance or in installments.
• Deposit of TDS: The deducted TDS should be deposited to the government account using Form 26QB within 30 days from the end of the month in which TDS was deducted.
• Issue of TDS Certificate: The buyer must issue Form 16A (TDS Certificate) to the NRI seller within 15 days from the due date of furnishing the challan-cum-statement in Form 27Q.

3. Lower TDS Certificate Process

An NRI seller may apply for a lower or nil deduction certificate under Section 197 of the Income Tax Act if the actual tax liability is expected to be lower than the standard TDS rate.

• Application by NRI Seller: The NRI seller can apply for a lower TDS certificate from the jurisdictional Assessing Officer in India. The application is made using Form 13.
• Processing Time: The issuance of a lower TDS certificate can take a few weeks to a few months, depending on the assessment and verification process.
• Issuance of Certificate: Once approved, the Assessing Officer issues the lower or nil TDS certificate specifying the reduced rate of TDS.
• Furnishing to Buyer: The NRI seller must furnish this certificate to the buyer, who will then deduct TDS at the rate mentioned in the certificate instead of the standard rate.

4. Filing of TDS Return

• The buyer needs to file TDS returns on Form 27Q quarterly.
• The return should include details of the NRI seller, the property transaction, the amount paid, and the TDS deducted.

5. Non-Compliance Penalties

• Failure to deduct or deposit TDS may result in interest and penalties. The buyer may also be deemed an “assessee in default,” making them liable to pay the TDS amount along with interest.

When Should an NRI Apply for Lower TDS Certificate?

An NRI should consider applying if:

• Actual tax liability is lower than standard TDS

• There is long-term capital gain with indexation benefit

• Property was purchased long ago at high cost

• There are eligible deductions or carried-forward losses

• DTAA benefits are applicable

• Large sale transaction is involved and cash flow matters

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Practical Example 1: Property Sale by NRI

Mr. Arjun, an NRI living in the USA:

• Property purchase price (2011): ₹55 lakh

• Sale price (2025): ₹85 lakh

• Long-term capital gain: ₹30 lakh

Without Lower TDS Certificate

Buyer deducts TDS on full sale value:

• TDS @15%  (Approx.) on ₹85 lakh ≈ ₹12.75 lakh

Actual tax liability:

• Capital gains tax ≈ 30*15% (12.5%+ Surcharge+Cess) = ₹3.75 lakh

Refund wait: 6–12 months

With Lower TDS Certificate

• TDS restricted to actual tax payable

• Buyer deducts only ₹3.75 lakh

Immediate saving in cash flow: ~₹9 lakh

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Practical Example 2: NRO Fixed Deposit Interest

Ms. Ritu, NRI in UAE:

• NRO interest income: ₹4 lakh

• Bank deducts TDS @30% = ₹1.2 lakh

After deductions and slab benefit:

• Actual tax payable: ₹40,000

By applying for a Lower TDS Certificate, future interest TDS can be reduced substantially instead of claiming refund every year.

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Who Can Apply for Lower TDS Certificate?

Eligible applicants:

• NRIs earning income taxable in India

• Individuals, companies, LLPs, trusts (NRIs included)

• Persons with PAN and Indian income source

Not applicable for:

• Salary income

• Fully exempt income

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Types of Income Covered under Section 197

Lower TDS certificate can be applied for:

• Sale of property by NRI

• Rent from Indian property

• NRO interest

• Capital gains on shares or mutual funds

• Contractual or professional income

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How to Apply for Lower TDS Certificate (Step-by-Step)

Step 1: Online Application

Application is filed online in Form 13 on the income tax portal.

Step 2: Submit Supporting Documents

Key documents include:

• PAN card

• Passport and visa

• Sale agreement / rent agreement

• Cost of acquisition proof

• Working of capital gains

• Previous ITRs

• Bank statements

Step 3: Assessment by Income Tax Officer

The officer verifies:

• Past tax compliance

• Estimated income

• Tax liability calculation

Step 4: Certificate Issuance

If satisfied, the officer issues a certificate specifying:

• Applicable TDS rate

• Validity period

• Nature of income

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Validity of Lower TDS Certificate

• Valid for specific financial year

• Valid only for specified payer and income

• Cannot be reused across years automatically

Fresh application required each year.

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What Happens After Certificate is Issued?

Once issued:

• Share certificate copy with buyer / bank / tenant

• Payer deducts TDS strictly as per certificate

• No excess deduction

• Less refund dependency

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Common Mistakes NRIs Make

• Applying after transaction is completed

• Not providing proper cost proof

• Ignoring indexation benefit

• Assuming refund is the only option

• Buyer deducting TDS before certificate receipt

Timing is critical. Application should be made before payment or registration, wherever possible.

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Is ITR Filing Still Required After Lower TDS?

Yes.
Lower TDS certificate does not replace return filing.

ITR is required to:

• Report income

• Confirm tax computation

• Close the tax cycle

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FAQs on Lower TDS Certificate for NRIs

Is lower TDS certificate guaranteed?
No. It depends on facts, documentation, and tax history.

How long does approval take?
Typically 2–6 weeks, depending on case complexity.

Can buyer refuse to accept certificate?
No. Once valid, buyer is legally bound to follow it.

Can NRIs apply from outside India?
Yes. Entire process is online.

Is DTAA benefit linked to Section 197?
Yes, DTAA relief can be considered while determining lower rate.

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Final Takeaway

For NRIs, high TDS is a procedural safeguard, not the final tax.
With proper planning and timely application, Lower TDS Deduction Certificate can save lakhs and prevent long refund delays.

For assistance with:

• Lower TDS Certificate

• Property sale taxation

• Capital gains computation

• NRI income tax filing

N C Agrawal & Associates provides complete India-focused NRI tax support.

 

 

Paying rent to a Non-Resident Indian (NRI) involves specific tax deduction requirements under Indian tax laws. This article details the TDS obligations on rent payments to NRIs and explains the process for obtaining a lower TDS deduction certificate.

TDS on Rent Payment to NRIs

Deductor:
Any individual paying rent to an NRI must deduct tax at source under Section 195 of the Income Tax Act, 1961.

Deductee:
Tax must be deducted if the recipient is an NRI and the rental income is chargeable to tax in India, irrespective of any Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the NRI. Since the property is located in India, the rental income is taxable in India.

Rate of TDS:

1. Standard Rate: As per the Finance Act 2022, the standard rate is 30% plus applicable Surcharge and Health & Education Cess, amounting to 31.20%.
2. DTAA Rate: If a DTAA is in force, tax should be deducted at the rate specified in the Finance Act or the DTAA, whichever is more beneficial to the assessee.

Time of Deduction:
TDS must be deducted at the time of payment or credit of income, whichever is earlier. This rule applies even if the amount is credited to a ‘Suspense Account.’

Deposit of Tax Deducted at Source:
TDS is required to be deposited to the credit of the central government through Challan ITNS 281 within 7 days from the end of the month in which the tax was deducted. For deductions made in March, the deposit deadline is 30th April of the relevant assessment year.

Statement for Tax Deducted at Source:
The deductor must file a quarterly statement of tax deducted at source in Form 27Q by the due dates specified under Rule 31A.

Certificate of TDS:
The deductor shall issue a certificate of tax deducted at source in Form 16A within 15 days from the due date of furnishing the statement of tax deducted at source under Rule 31.

How to Obtain a Lower TDS Deduction Certificate

In some cases, the NRI landlord may be eligible for a lower TDS rate than the standard 31.20%. To avail of this benefit, the NRI must obtain a certificate for lower TDS deduction from the Income Tax Department.

Steps to Obtain a Lower TDS Deduction Certificate:

1. Application Form:

• The NRI must file an application in Form 13 to the Assessing Officer (International Taxation) under whose jurisdiction their case falls. The form should include details such as the name and address of the applicant, PAN, status (resident/non-resident), and nature and amount of income.

1. Supporting Documents:

• The NRI must submit supporting documents along with the application form, including:
  • Proof of income (such as rental agreements)
  • Computation of income
  • Past tax returns (if applicable)
  • Details of investments or other deductions claimed

1. Submission:

• The completed application form, along with the supporting documents, must be submitted to the Assessing Officer. This can be done online through the Income Tax Department’s website or physically at the respective office.

1. Assessment:

• The Assessing Officer will review the application and documents to determine the appropriate TDS rate. If the officer is satisfied with the evidence provided, a certificate specifying the lower TDS rate will be issued.

1. Issuance of Certificate:

• Upon approval, the Assessing Officer will issue a certificate under Section 197 of the Income Tax Act, specifying the lower TDS rate applicable to the NRI. This certificate must be presented to the tenant (deductor) to apply the reduced TDS rate on future rent payments.

1. Validity:

• The lower TDS deduction certificate is usually valid for the financial year in which it is issued. The NRI may need to reapply for subsequent years if they continue to qualify for the reduced rate.

Example:

Ms. Singh, an NRI, receives ₹50,000 per month as rent from her property in India. The standard TDS rate applicable is 31.20%, amounting to ₹15,600 per month. Ms. Singh applies for a lower TDS deduction certificate, providing necessary documents to the Assessing Officer. Upon review, the officer issues a certificate allowing a reduced TDS rate of 20%. The tenant must then deduct TDS at 20% instead of 31.20%, reducing the monthly TDS to ₹10,000.

Conclusion

Understanding the TDS obligations and the process for obtaining a lower TDS deduction certificate is crucial for NRIs receiving rental income from properties in India. Compliance with the stipulated rates, timely deductions, and proper documentation ensures smooth transactions and avoids penalties.

The above article has been written by CA Neeraj Bansal and he can be reach out at +91-971804655.