Indian rental income when you are a German tax resident

In India the rent is income from house property. You are taxed after a flat 30% standard deduction under Section 24, which you get whatever you actually spent, and after home-loan interest, with the balance at slab rates. As a non-resident landlord, your tenant must deduct TDS under Section 195 on the gross rent, which over-deducts against your real Indian tax, so you recover the excess by filing an Indian return or reduce it up front with a lower-deduction certificate.

Under the treaty, Article 6 gives India, where the property sits, the first right to tax the rent. That much is like every other country. What differs is what Germany then does, and it is unusually favourable.

Most countries tax the foreign rent as well and give a credit for the India tax, so a resident pays the higher of the two. Germany does not, for rental income. Under Article 23 of the India-Germany treaty, Germany relieves this income by exemption, not credit, so the Indian rent is exempt from German income tax.

There is one string attached, called exemption with progression. Germany takes the exempt Indian rent into account only to work out the tax rate that applies to your German income, then applies that slightly higher rate to your German income alone, not to the Indian rent. So the rent itself bears no German tax; it just nudges up the rate on everything else you earn in Germany. For most people that progression effect is small, and the practical result is that India's slab tax on the rent is the only real tax you pay on it.

The upshot is simpler and usually cheaper than you feared: get the Indian side right, and there is no separate German tax on the rent to worry about, only a modest rate effect. Germany does compute a shadow figure for the rent on its own rules, actual costs and building depreciation rather than India's flat 30%, but that only feeds the progression rate, not an actual German tax bill.

So the work that matters is the Indian return: claiming the 30% deduction and interest, recovering the over-deducted TDS, and having a clean record of the Indian tax and the rental figure for your German accountant to slot into the progression calculation. A practising CA files the Indian side, reclaims the TDS, and gives your German accountant the exempt-income figure they need, so nothing is double-counted and nothing is missed.