How can NRIs in Dubai ensure compliance with Indian tax laws on rental income from properties in India?

Answered by

A Agarwalla & Co.

Published At June 18, 2024

Answer

NRIs in Dubai can ensure compliance with Indian tax laws on rental income from properties in India by following these essential steps for NRI property tax management:

  • Tenant’s Responsibility for TDS: The tenant must deduct 31.2% Tax Deducted at Source (TDS) on the rental income and deposit it with the Indian government​.
  • Annual Tax Filing: NRIs must file an income tax return in India reporting their rental income. This is mandatory even if the TDS has been deducted by the tenant. The filing helps NRIs claim any excess TDS as a refund and maintain compliance with tax laws​.
  • NRO Account: Rental income must be credited to a Non-Resident Ordinary (NRO) account. Up to $1 million of NRO funds can be repatriated per financial year, ensuring easy access to rental income​.
  • Double Taxation Avoidance Agreement (DTAA): NRIs should check if their country has a DTAA with India. This agreement can help avoid being taxed twice on the same income, thereby reducing the overall tax burden​.
  • Avoid Penalties: Ensuring timely and accurate tax filing helps avoid penalties and legal issues. Failure to comply can result in fines and prosecution under Section 276B of the Income Tax Act, 1961​.

By adhering to these steps, NRIs can effectively manage their tax liabilities and ensure compliance with Indian tax laws on rental income from properties in India, thus maintaining a clean financial record and avoiding legal complications.