When your tenant is a company, and you are a non-resident landlord

Companies are used to deducting rent TDS under Section 194-I, the 10% rule, because most of their landlords are residents. That rule, and the individual-tenant rule under Section 194-IB, both apply only where the landlord is a resident. When the landlord is a non-resident, neither applies, and the company must instead deduct under Section 195, the section for any payment to a non-resident.

So the correct deduction on rent paid by a company to an NRI landlord is under Section 195 at the non-resident rate on the gross rent, plus surcharge and cess, not the flat 10% the company may be used to. A company that deducts 10% under 194-I on an NRI's rent has deducted under the wrong section, which exposes it as the deductor, so getting the tenant onto Section 195 from the start avoids a problem for both sides.

Deducting under Section 195 puts a specific chain of obligations on the company. It has to hold a TAN, deduct on each rent payment, deposit the tax, file a quarterly Form 27Q, the return for payments to non-residents, rather than the Form 26Q it uses for residents, and issue you a Form 16A certificate for the deduction.

That Form 16A and the Form 27Q filed against your PAN are what put the TDS into your Form 26AS so you can claim it. A company is well-placed to run this correctly, it already has the systems, but it needs to know to treat you as a non-resident payee and use the non-resident forms. A practising CA sets the tenant up on the right footing at the start of the tenancy so the credit reaches you cleanly.

The Section 195 deduction is on the gross rent, but your actual tax is much less, because when you file you get a flat 30% standard deduction on the rent under Section 24(a), and you can deduct home-loan interest on the property. So the withheld amount typically runs well ahead of your real liability.

The excess is recovered on your return: you compute the real tax on the rent after the 30% deduction and interest, set the Section 195 TDS against it, and the surplus is refunded. Better still, a Form 13 lower-deduction certificate, filed at the start, lets the company deduct on your real net rental income rather than the gross, so far less is withheld in the first place. A practising CA arranges the certificate, keeps the tenant's deduction correct, and reconciles it on your return.