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New Zealand

Indian rental income when you are a New Zealand tax resident

You rent out a property in India but live in New Zealand, and if you have moved recently, the first four years may be exempt.

You own a property in India that earns rent, and you are a tax resident of New Zealand. India taxes the rent, and New Zealand taxes its residents on worldwide income, so it taxes it too, with a credit for the India tax. But there is a big exception many recent migrants do not know about: for your first four years as a new tax resident, most foreign income, including your Indian rent, can be exempt in New Zealand. Here is how the two sides fit, and how that window changes things.
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Last reviewed: 26 July 20267 min readReviewed by Preetesh Maloo, CA

The short answer

Your Indian rent is taxed in India, after a flat 30% standard deduction, with the tenant deducting TDS under Section 195 on the gross rent. New Zealand taxes it too, computed on NZ rules with actual expenses, and gives a foreign tax credit for the India tax. The important exception is the transitional-resident exemption: if you are in your first roughly four years as a new NZ tax resident, most foreign income, including the Indian rent, is exempt in New Zealand, so only India taxes it during that window. After the window, NZ taxes it with a credit, and a rental loss is ring-fenced, it cannot offset your NZ salary.

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Related situations

The India side

In India the rent is income from house property, taxed after a flat 30% standard deduction under Section 24, which you get whatever you actually spent, and after home-loan interest, at slab rates. As a non-resident landlord, your tenant must deduct TDS under Section 195 on the gross rent, from the first rupee with no monthly threshold, which over-deducts against your real Indian tax. You recover the excess by filing an Indian return, or reduce it up front with a lower-deduction certificate. India taxes the rent whatever New Zealand does.

New Zealand, and the four-year window

New Zealand taxes a resident on worldwide income, so the Indian rent is assessable there, computed on NZ rules, actual expenses rather than India's flat 30%, and NZ gives a foreign tax credit for the India tax, up to the NZ tax on that rent.

But the timing matters enormously for a recent migrant. New Zealand gives a new tax resident a transitional-resident exemption for roughly the first four years, during which most foreign income, including your Indian rent, is exempt from NZ tax altogether. So in those years only India taxes the rent, and there is no NZ tax on it. One consequence to note: because NZ is not taxing the rent in that window, there is no NZ tax for the India tax to be credited against, so the India tax stands alone and is recovered, if over-deducted, only through your Indian return. After the four years, NZ taxes the rent with a credit for the India tax, and if the Indian property runs at a loss for NZ purposes, that residential loss is ring-fenced, it cannot be set against your NZ salary or other income.

What's involved

What the CA actually does

  1. 1

    We file the Indian return

    We compute the rent after the 30% deduction and interest and file to recover the gross-basis TDS the tenant deducted under Section 195.

  2. 2

    We flag the transitional window

    We check whether you are still within the four-year transitional-resident period, in which the Indian rent is exempt in NZ, so you plan around it.

  3. 3

    We cut the over-deduction

    We get a lower-deduction certificate where the cash tie-up matters, so the tenant withholds closer to your real Indian tax.

  4. 4

    We provide the credit paperwork

    After the window, we give your NZ accountant the India-tax-paid detail for the foreign tax credit.

What to have ready

Documents you'll typically need

  • The Indian rental income and any home-loan interest
  • The TDS the tenant deducted (Form 16A)
  • The date you became a NZ tax resident, for the transitional window
  • Your PAN and NZ tax details

References on this page

  • India: house-property income after a flat 30% deduction (Section 24) and interest; TDS on gross rent under Section 195
  • New Zealand taxes the rent on its own rules (actual expenses), with a foreign tax credit for the India tax (treaty Article 23)
  • The 4-year transitional-resident exemption can make the Indian rent exempt in NZ for a new migrant
  • A residential rental loss is ring-fenced in NZ; it cannot offset salary or other income

Frequently asked questions

Common questions

Yes, on its own rules with a credit for the India tax, unless you are within your first roughly four years as a new NZ tax resident, when the transitional-resident exemption makes the Indian rent exempt in NZ.

A relief for new migrants: for roughly four years after becoming a NZ tax resident, most foreign income, including your Indian rent, is exempt from NZ tax. So during that window only India taxes the rent.

Yes. India taxes the rent regardless. And because NZ is not taxing it in that window, there is no NZ tax to credit the India tax against, so you recover any over-deducted Indian TDS through your Indian return.

No. New Zealand ring-fences residential rental losses, including on overseas property, so a loss carries forward against future rental income and cannot offset your NZ salary or other income.

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

NRE and NRO interest when you are a New Zealand tax residentSelling Indian property while you are a New Zealand tax residentProving the tax you paid in India, to claim a foreign tax credit abroadNRI ITR filing (we file for you)DTAA TDS recoveryForm 13 lower-TDS certificate (property sale)Rental income TDS calculatorForm 10F generator

Indian rent and a New Zealand tax return?

Send us the rent and your NZ residency date. A practising CA will file the Indian side and flag the four-year window on a free call, no obligation.

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