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Bahrain NRIs · Rental Income Tax

Rental income tax for NRIs in Bahrain

Your tenant must deduct tax on the gross rent, and no India-Bahrain treaty exists to cap it. Two India-side moves bring it back down.

Rent from Indian property is taxed in India whatever passport you carry, because the building is here (Section 9(1)(i)). India and Bahrain have no tax treaty. The 2012 agreement between them is a Tax Information Exchange Agreement, which lets the two tax offices share information but caps no withholding rate. On rent, that absence costs you almost nothing, since treaties leave property income taxable where the property stands. The bite is the withholding: your tenant must deduct under Section 393(2) (Section 195 until 31 March 2026) at 31.2% on the gross rent, not under the lighter resident-landlord rule, and gross rent is far more than you're actually taxed on. Two India-side moves fix it. A Form 128 certificate cuts the monthly deduction at source, and your annual return reclaims what has already gone.
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India-Bahrain key facts: rental income tax

India's default non-resident rate of 31.2% applies here with nothing to claim it down to.

A Form 128 certificate and the 30% deduction are the levers. No certificate is needed on either side: there is no treaty rate to claim in India, and nothing is charged on this income in Bahrain.

This is India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026). There is no India-Bahrain treaty to modify it. Surcharge applies on top; the 4% cess is already included in this figure.

How it works on the India side

A tenant paying rent to an NRI landlord must deduct TDS under Section 393(2) (Section 195 until 31 March 2026), the provision 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 144 (the old Form 27Q) against your PAN, and issue you a TDS certificate. The common, costly mistake is the tenant using Section 194-IB, the 2% 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 quarterly statement correctly reports it against your PAN, which is why setting the tenant up right from the start matters. If you'd rather not wait a year for that refund, a lower-deduction certificate on Form 128 under Section 395 (the old Form 13 under Section 197) can cut the monthly deduction at source instead.

What changes because you live in Bahrain

Bahrain takes nothing off this Indian income. There's no personal income tax, no capital gains tax and no net wealth or inheritance tax on individuals, and no foreign tax relief legislation either, so the Indian tax withheld earns you no credit on the Bahrain side. The trap here is paperwork, not tax. Bahrain tells the OECD it issues no tax identification numbers for CRS purposes, so you have no Bahrain TIN to quote. Don't leave the box blank. Indian banks, AMCs and depositories read that field as TIN or functional equivalent, and for Bahrain they accept your Bahrain ID or CPR number, so give it with the issuing country. Skip it and the institution can't treat your self-certification as valid under Rule 240 of the Income-tax Rules 2026, the old Rule 114H, and transactions like an FD renewal or a redemption can sit restricted until you redo the form.

Frequently asked questions

Common questions from Bahrain NRIs

Under Section 393(2), the successor to Section 195, because you're a non-resident landlord. The tenant has to take a TAN, deduct on the gross rent at the 31.2% non-resident rate, deposit it, file a quarterly Form 144 (the old Form 27Q) against your PAN and give you the TDS certificate. Section 194-IB, the 2% rule most tenants know (it was 5% until 1 October 2024), applies only to resident landlords and is the wrong provision for a non-resident.

Yes. The deduction is on the gross rent, but your taxable rental income is much smaller, because 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 quarterly statement correctly reports the TDS against your PAN. Bahrain NRIs who don't want to wait for that refund apply for a Form 128 certificate instead.

There is no India-Bahrain treaty, and on rent that makes no practical difference, because India's treaties leave income from Indian property taxable in India too. The rent normally isn't taxed in Bahrain, so what India takes is what it costs you. Your saving comes from the 30% standard deduction, the home-loan interest, and a certificate that stops the over-deduction at source rather than chasing it a year later.

Go further

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

NRI landlord: setting your tenant up for Section 195 TDSBahrain NRI tax guide: every income type and the rates that apply

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