Dubai resident shocked: He rented his India flat for Dh4,000—but lost Dh1,200

Dubai: A UAE-based NRI I’ll call Arjun — a stand-in for several similar cases I’ve come across — recently reviewed his India income statements and noticed something many overseas Indians discover only after losing money: his income was consistently lower than expected.

What he thought would be a routine check of rents credited turned into a closer look at how Tax Deducted at Source (TDS) affects non-residents.

Arjun rents out a Mumbai apartment for ₹100,000 (about Dh4,000) a month. His tenant, following the law, transferred only about ₹70,000 (Dh2,800). The remaining 30% — roughly ₹30,000 (Dh1,200) — was cut as TDS because he is classified as a non-resident under Indian tax rules. When he mentioned it to me, he said he initially assumed the tenant had made an error.

“I thought the tenant miscalculated,” he told me. “But the deduction was accurate. I just hadn’t understood how much TDS takes off the top for NRIs.”

His experience mirrors a broader issue: non-residents face higher, fixed TDS rates on almost all India-based income streams — rent, interest on deposits, company payouts like dividends, and profits made when selling property or investments.

When Arjun dug deeper and reviewed his Form 26AS, the deductions showed up across income categories:

For NRIs, these deductions apply regardless of what their real tax liability should be. The tax department collects at source because non-residents live abroad and may not file returns as consistently as residents. The system deducts tax on the total amount received, without adjusting for deductions or exemptions an individual is eligible for.

Arjun eventually realised he had paid more tax upfront than he actually owed, leaving him with pending refunds — a process that can stretch over months. “It felt like money was being blocked without any connection to what I actually owed,” he said.

During a consultation, Arjun learned about a provision many NRIs remain unaware of: Form 13 under Section 197 of the Income Tax Act, which allows non-residents to request a lower or nil TDS certificate.

To apply, he had to submit a simple set of details: what he expects to earn from India, records of earlier tax payments, proof that he is an NRI, and supporting financial documents.

The Income Tax Department reviews the documents and then issues a certificate stating the TDS rate that should apply. Arjun saw the impact immediately — his next rental transfer came in at the reduced rate.

When he later exited another investment, the buyer used the rate on the certificate rather than the default 20–30%. “The difference in cash flow was immediate,” he told me. “It finally lined up with my actual tax liability.”

India’s TDS framework ensures early tax collection. But for NRIs, the system often results in over-deduction, since the flat rates do not reflect individual exemptions or real taxable income. Refunds do come through, but delays are common, and the blocked cash can affect financial planning.

A lower or nil TDS certificate helps align upfront deductions with true tax liability, giving non-residents more predictable cash flow. For NRIs earning regular rent, receiving interest or company payouts, or planning a property sale, the difference can be substantial.

Arjun’s case is just one example. Many NRIs have shared similar experiences, often realising something is wrong only when their India income suddenly seems lower than it should be. As overseas Indians continue investing in property and financial assets back home, clarity on TDS rules — and how to legally reduce them — is becoming increasingly important.