Renting Out a Bangalore Flat from Abroad: What an NRI Keeps After Tax and Costs

Rent from a Bangalore flat looks healthy in a listing, but an owner living abroad sees a far smaller sum arrive. Costs of ownership take a share first, and then the tenant holds back tax before paying a rupee. This article walks through each deduction, the withholding rule for landlords living abroad, one worked case in full and the route to a lower deduction.

Three Yields, Not One

Gross yield is a year of rent divided by what the home cost. A flat bought for Rs. 1.5 Crore and let at Rs. 48,000 a month yields about 3.8% on that basis. The number helps compare two homes, yet it presumes twelve rented months and no spending at all.

Net yield deducts what it costs to own and let the home. A non-resident has a third number to watch, namely the money that actually reaches the bank over twelve months, after the tenant's withholding. These figures can differ widely, so each one is worth working out before a booking.

What Owning a Rented Flat Costs

A landlord abroad faces the same running costs as one living in the city, and in a big gated community they often exceed first-time expectations. Typical items are these:

• Monthly dues to the owners' association, billed by area whether or not a tenant lives there
• Empty weeks between tenants, which often stretch to a few at every changeover
• A broker's fee for a new tenant, or a yearly charge to a property manager
• Municipal property tax and home insurance
• Repairs and repainting, plus servicing of appliances where the flat is furnished

Living overseas makes a property manager nearly indispensable. That person shows the flat, writes the lease, collects rent, arranges repairs and takes back the keys after a tenancy. Charges vary between firms, so the services included should be agreed in writing.

Tax Held Back From the Rent

When the owner is a non-resident, the tenant has to withhold tax from each rent payment, with no exceptions for small rents. The base rate is 30%, to which surcharge is added where it applies, along with a 4% cess. In effect the tenant keeps back a minimum of 31.2%, and the Rs. 50,000 monthly cut-off that protects smaller rents of resident landlords is irrelevant here.

The rule used to be section 195 of the 1961 law, and from 1 April 2026 it is found in the 2025 Act as section 393. Responsibility rests with the tenant, who pays the held-back sum to the government and passes a TDS certificate to the owner. If a tenant forgets, the tax and interest become the tenant's own bill, which is why corporate tenants are strict about it.

What is held back is an advance, and the final liability is generally lower. Taxable rent is what remains after municipal taxes, a standard 30% deduction and any loan interest on the home. Someone whose other Indian income is small frequently owes well under 31.2%, and the balance returns as a refund once the return is filed.

A Worked Case

Consider a 1,400 sq ft flat bought for Rs. 1.5 Crore including all costs and let at Rs. 48,000 a month. These round figures only demonstrate the method, and every owner should substitute real quotes.

• Twelve months of rent come to Rs. 5.76 Lakhs, a gross yield of 3.8%
• A single empty month costs Rs. 48,000, which leaves Rs. 5.28 Lakhs collected
• Association dues of Rs. 5 on every square foot each month total Rs. 84,000
• The manager's 8% share of rent collected is Rs. 42,240
• Property tax with insurance adds Rs. 15,000, and repairs add Rs. 20,000
• That leaves about Rs. 3.67 Lakhs of net rent before tax, a net yield of 2.4%
• The 31.2% withheld on the Rs. 5.28 Lakhs collected takes away about Rs. 1.65 Lakhs
• What the owner actually banks over the year is about Rs. 2.02 Lakhs

So a 3.8% headline shrinks to 2.4% after costs, and cash banked across the year is only 1.3% of the price. Most of the Rs. 1.65 Lakhs held back comes back as a refund if the final tax turns out smaller, though only after the financial year closes.

The case leaves out any home loan. Interest lowers the taxable rent, while the instalment cuts cash in hand far more. The EMI calculator gives the monthly figure to compare with the rent.

Getting the Withholding Rate Reduced

An owner expecting a final tax below the standard rate can approach the Assessing Officer for a certificate that allows deduction at a smaller percentage. Under the 2025 Act the relevant provision is section 395, which succeeded section 197. The request is made online with a forecast of the year's income and tax.

The certificate lists the tenant and the permitted rate, and the tenant then withholds at that rate for the period covered. A fresh one is needed each financial year and whenever the tenant changes. Most owners hand the filing to an Indian chartered accountant, who also files the annual return.

Receiving the Money Abroad

Rupee rent arrives in the NRO account that the owner holds. Because it is current income, it can be sent overseas once its tax is cleared, and the bank will request proof. Keeping TDS certificates alongside the filed return makes that easy.

Without a PAN, TDS credit, the return and any refund cannot proceed. The country of residence may tax the same rent too, giving credit for tax paid here under a treaty. How that works varies by country, so advice there is needed.

Testing a Purchase Before Booking

An investor who plans to rent the home should build this model before paying any booking amount:

1. Work out gross yield on the entire spend: stamp duty, registration, GST and interiors included
2. Find the society's monthly rate and multiply it by twelve
3. Allow a minimum of one idle month, longer for a freshly delivered project
4. Add manager fees, a repair reserve, insurance and municipal tax
5. Subtract the 31.2% held back to see first-year cash, then plan for the reduced-rate certificate

Rent covers only one side of the return, and price growth over the holding period is the other. Homes close to a major office district in Bangalore usually find tenants faster, which does more than any other choice to cut vacancy. Overseas buyers can read how we support them on the NRI services page.

The tax points here are general information for 2026-27. Each Finance Act can alter rates and procedures, so a tax adviser should confirm the position before any step is taken.