Photo: iStock
Photo: iStock

Rental income from property in India taxable for NRIs

Income from a property situated in India must be reported in India by filing a return and relevant tax must be paid on it

I have an income of 2 lakh from two farm houses I have rented out in Manali. I am an NRI. How much tax will I have to pay? I have no other sources of income in India. Am I allowed any tax deductions?

—Name withheld on request

Income from a property situated in India must be reported in India by filing a return and relevant tax must be paid on it. To calculate your tax, you must calculate the “income under the head house property". Sum up your annual rental income. You may do this calculation for both the farm houses separately. From this rental income, reduce municipal tax already paid by you. You will arrive at your net annual rental income. You are allowed a 30% deduction towards any repairs, maintenance costs that you may have incurred. Now, sum up both the rental incomes after the allowed 30% standard deduction and report this number in your tax return. Do sum up any other income which has been earned in India. You can claim deduction allowed under Section 80C to save tax.

I had sent 66 lakh to my sister 3 years ago to fund her daughter’s education. I am an NRI and live in Germany. How can she repay me so that I don’t have to pay a tax on the amount received?

—Kadambari Jindal

It appears that your sister is based out of India and is returning a loan she took from you. This payback is not a gift for the purpose of income tax. She may or may not be paying interest to you, depending upon what has been agreed upon. Receipt of just the loan amount extended without interest would not give rise to any income in your hands in India. However, if she repays it with interest, you will have to offer the interest income to tax in India under the head “income from other sources". Since you are a resident of another country, you do consider local tax implications on such receipt, with or without interest.

To read more queries, go to livemint.com/askmintmoney

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at mintmoney@livemint.com

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