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Property, Rental

Renting out a co-owned Indian property, and splitting the tax and TDS

The rented property is in more than one name, and you are unsure whose income the rent is and how the tax is divided.

You rent out an Indian property that you co-own, perhaps with a spouse, a sibling or a parent, some resident in India and some not. The rent comes in, and you are unsure whether it is taxed as one lump on the property or divided between the owners, whose return it belongs on, and how the tenant is supposed to deduct tax when the owners have different residency. The law is clear that co-owners are taxed separately on their shares, and the TDS follows the same split, which usually works in your favour.
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Last reviewed: 26 July 20267 min readReviewed by Preetesh Maloo, CA

The short answer

When a rented property is co-owned and the shares are definite, each owner is taxed only on their own share of the rent, not jointly and not as an association of persons, and each gets their own 30% standard deduction and their own share of any loan interest (Section 26). The TDS follows the same logic: on a non-resident co-owner's share the tenant deducts under Section 195, and on a resident co-owner's share under the resident rules. So a property owned by an NRI and a resident is not one blended deduction; it is split by owner, and each owner reports and reconciles their own share.

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Related situations

Each co-owner is taxed on their own share

The starting rule is favourable. Where a house property is owned by two or more people whose shares are definite and ascertainable, they are not taxed jointly as an association of persons; instead each co-owner's share of the rental income is included in that co-owner's own total income (Section 26). So the rent is divided by ownership share and each person is taxed on their part.

The benefit is that each co-owner computes their share the full way: each gets their own 30% standard deduction on their share of the annual value, and each deducts their own share of any home-loan interest. So two co-owners each get a 30% deduction on their halves, not one 30% on the whole, and a self-occupied nil-value treatment, where it applies, is available to each individually.

The TDS splits by owner, not the property

The withholding follows the same split, and this is where mixed-residency co-ownership needs care. The tenant does not apply one rate to the whole rent; the deduction is worked out for each co-owner as a separate payee in their ownership ratio. On a non-resident co-owner's share, the tenant deducts under Section 195, because that is the section for paying a non-resident. On a resident co-owner's share, the tenant uses the resident rules instead.

So a flat owned half by an NRI and half by a resident sibling has two deductions running: Section 195 on the NRI's half, and the resident rule on the resident's half, each with its own paperwork. Treating it as one blended deduction, or applying a resident rate to the NRI's share, is the common error, and it leaves the tenant exposed on the NRI portion.

Why the split usually means a refund

On the NRI's share, the Section 195 deduction is on the gross rent at the non-resident rate, which is heavier than the tax you actually owe, because when you file you get the 30% standard deduction on your share and can deduct your share of any loan interest. So the withheld amount is typically more than your real liability.

That gap comes back to you. You compute your real tax on your share of the rent after the 30% deduction and interest, set the Section 195 TDS against it, and the excess is refunded, or you reduce the deduction up front with a Form 13 lower-deduction certificate. A practising CA sets the tenant up to split the deduction correctly, files each co-owner's return on their share, and reclaims the over-deducted TDS on the NRI's portion.

What's involved

What the CA actually does

  1. 1

    We split the rent by ownership

    We divide the rent, the 30% deduction and any interest by each owner's definite share, so each co-owner is taxed only on their own part.

  2. 2

    We set the tenant up to deduct correctly

    We make sure the tenant deducts under Section 195 on the NRI's share and the resident rule on a resident's share, rather than one blended figure.

  3. 3

    We reduce the withholding

    We file a Form 13 so the Section 195 deduction on the NRI's share reflects the real tax after the 30% deduction, not the gross rent.

  4. 4

    We file and reclaim

    We file each co-owner's return on their share and recover any over-deducted TDS on the NRI portion.

What to have ready

Documents you'll typically need

  • The ownership documents showing each co-owner's share
  • The tenancy agreement and the rent received
  • Any home-loan interest details, by owner
  • PAN and residency details for each co-owner

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next, how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 46 countries.

References on this page

  • Section 26: co-owners with definite shares are each taxed on their own share, not as an association of persons
  • Each co-owner gets their own 30% standard deduction (Section 24(a)) and interest deduction on their share
  • Section 195 on the non-resident co-owner's share; resident rules on a resident co-owner's share
  • The 30% deduction means the Section 195 on gross usually over-deducts and is reclaimed

Frequently asked questions

Common questions

No. Where the co-owners' shares are definite, each is taxed only on their own share of the rent (Section 26), not jointly or as an association of persons, and each gets their own 30% standard deduction and interest deduction on their share.

It splits by owner. On the NRI co-owner's share the tenant deducts under Section 195; on the resident co-owner's share under the resident rules. It is not one blended deduction, and applying a resident rate to the NRI's share leaves the tenant exposed.

Usually yes on the NRI's share. Section 195 is deducted on the gross rent, but your real tax is on your share after the 30% standard deduction and any interest, so the deduction over-shoots. You reclaim the excess on your return or reduce it up front with a Form 13.

Yes. Each co-owner reports their own share of the rent on their own return and reconciles their own TDS. A CA keeps the split consistent across both the deduction and the filings.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

House property standard deduction and interest cap

Right now: 30% standard deduction on net annual value

Where it works differently

The property is self-occupied
Interest deduction is capped at Rs 2 lakh under s.24(b).
Second proviso to s.24(b).
The property is let out
Full interest is deductible against rent, but the resulting LOSS that can be set against other heads is capped at Rs 2 lakh a year, with an 8-year carry-forward.
s.71(3A), from AY 2018-19. Frequently missed by leveraged NRI landlords.
The new tax regime applies
No set-off of house-property loss against other income at all.
s.115BAC restriction. NRIs are in the new regime by default.

Commonly got wrong

  • Full home-loan interest can be set against salary. Capped at Rs 2 lakh in the old regime, and disallowed entirely in the new regime.In the old regime you may deduct home-loan interest, capped at Rs 2 lakh for a self-occupied property, with the set-off against other income capped at Rs 2 lakh a year. In the new regime, which is the default, there is no set-off at all.

Related

If this matched your situation, these go further

Renting out your Indian property as an NRI, setting your tenant up for the right TDSWhen your tenant is a company, and you are a non-resident landlordReporting your Indian rental income in your return as an NRINRI ITR filing (we file for you)DTAA TDS recoveryForm 13 lower-TDS certificate (property sale)Rental income TDS calculatorForm 10F generator

Renting out a property you co-own?

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