As an NRI in Australia renting out Indian property, how is my tenant supposed to deduct tax?

Under Section 195, because you're a non-resident landlord. The tenant has to take a TAN, deduct on the gross rent (the 31.2% non-resident rate), deposit it, file a quarterly Form 27Q against your PAN and give you a Form 16A. Section 194-IB — the simple 5% rule most tenants know — applies only to resident landlords and is the wrong section for an NRI in Australia.

The TDS on my rent looks far higher than my actual tax. Will I get it back?

Yes. Section 195 is deducted on the gross rent, but your taxable rental income is much smaller — you get a flat 30% standard deduction under Section 24(a) plus any home-loan interest before tax is computed. The over-deducted amount comes back as a refund when you file your Indian return, provided the tenant's Form 27Q correctly reports the TDS against your PAN.

Does the India-Australia treaty lower the tax on my Indian rental income?

No — Indian rental taxed at source (India); reported on Australian return with FITO credit, so Indian rental income stays taxable in India regardless of where you live. Australia also taxes the rent as part of worldwide income, with a foreign tax credit for the Indian tax paid. The treaty stops double taxation; the saving on rent comes from the 30% standard deduction and reclaiming the over-deducted TDS, not from a lower treaty rate.

Australia NRIs · Rental Income Tax

Rental income tax for NRIs in Australia

Renting out Indian property from Australia means your tenant must deduct tax under Section 195 — set it up right and reclaim the heavy over-deduction.

When you rent out Indian property while living in Australia, the rent is taxed in India — under the India-Australia treaty, immovable-property income is taxable where the property sits (Indian rental taxed at source (India); reported on Australian return with FITO credit), so the rate doesn't drop for living abroad. Because you are a non-resident landlord, your tenant is legally required to deduct tax at source on the rent under Section 195 (at the 31.2% non-resident rate on the gross rent), not under the lighter resident-landlord rule. The deduction is heavier than your actual tax, because you get a 30% standard deduction when you file — so most of the gap comes back as a refund.

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India-Australia key facts: rental income tax

Default Section 195 rate	31.2%
India-Australia DTAA treaty rate	31.2%
Your saving via the treaty	No rate reduction — see note below
Treaty article / basis	Indian rental taxed at source (India); reported on Australian return with FITO credit
Your TRC issuing authority	Australian Taxation Office (ATO)

Rates reflect India's domestic Section 195 withholding and the India-Australia treaty. Surcharge and cess apply on top where relevant.

How it works on the India side

A tenant paying rent to an NRI landlord must deduct TDS under Section 195 — the section for any payment to a non-resident — which means the tenant has to take a TAN, deduct each month on the gross rent, deposit it, file a quarterly Form 27Q against your PAN, and issue you a Form 16A. The common, costly mistake is the tenant using Section 194-IB (the 5% resident-landlord rule), which doesn't apply to a non-resident landlord and leaves both sides exposed.

The deduction on gross rent is more than you actually owe, because your taxable rental income is much smaller: a flat 30% standard deduction comes off under Section 24(a), and home-loan interest comes off too. When you file your return, the TDS the tenant deposited is set against your real liability and the excess is refunded — but only if the tenant's Form 27Q correctly reports it against your PAN, which is why setting the tenant up right from the start matters.

What changes because you live in Australia

Australian residents are taxed on worldwide income, so this Indian income also flows onto your ATO return, with a Foreign Income Tax Offset (FITO) crediting the Indian tax already paid against your Australian liability. The FITO is capped at the Australian tax that would have applied to that same Indian slice, so if your Indian withholding ran higher, the excess is wasted unless carried forward correctly. One trap most NRIs miss: assets held before you became an Australian resident get a deemed cost base reset to their AUD market value on your arrival day (s.855-45), so using the original rupee cost overstates the gain and overpays Australian tax.

Frequently asked questions

Common questions from Australian NRIs

Go further

Read the full guide, or see your country's complete picture

NRI landlord — setting your tenant up for Section 195 TDS Australia NRI tax guide — all income types & DTAA rates

Rental Income Tax sorted, by an Indian CA who works with Australian NRIs

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