As an NRI in Luxembourg 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 Luxembourg.

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-Luxembourg treaty lower the tax on my Indian rental income?

No — Article 6, source-country taxation, so Indian rental income stays taxable in India regardless of where you live. Luxembourg 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.

Luxembourg NRIs · Rental Income Tax

Rental income tax for NRIs in Luxembourg

Renting out Indian property from Luxembourg 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 Luxembourg, the rent is taxed in India — under the India-Luxembourg treaty, immovable-property income is taxable where the property sits (Article 6, source-country taxation), 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-Luxembourg key facts: rental income tax

Default Section 195 rate	31.2%
India-Luxembourg DTAA treaty rate	31.2%
Your saving via the treaty	No rate reduction — see note below
Treaty article / basis	Article 6, source-country taxation
Your TRC issuing authority	Administration des contributions directes (ACD)

Rates reflect India's domestic Section 195 withholding and the India-Luxembourg 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 Luxembourg

Luxembourg residents are taxed on worldwide income, sorted into tax classes by family status, with a foreign tax credit for the Indian tax paid. The treaty's flat 10% cap on Indian interest and dividends applies to everyone, with no shareholding sub-rate, so even a large holder gets the lower rate once a TRC and Form 10F are on file. That makes claiming the treaty rate up front worthwhile rather than suffering the 20% dividend default and reclaiming later.

Frequently asked questions

Common questions from Luxembourg NRIs

Go further

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

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

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

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