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Switzerland

Indian rental income when you are a Swiss tax resident

Switzerland does not tax your Indian rent, it only uses it to set the rate on your Swiss income.

You own a property in India that earns rent, and you are a tax resident of Switzerland. Switzerland taxes worldwide income, so you might expect it to tax the Indian rent on top of India. It does not, foreign real-estate income is treated specially, exempt but counted to set your rate. So India's tax on the rent is the only real one. Here is how the two sides fit, and one thing to watch on the wealth-tax side.
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Last reviewed: 26 July 20266 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 at about 30%, higher than the resident rates. Switzerland does not actually tax the Indian rent: foreign real-estate income is exempt, and only counted to set the tax rate on your Swiss income, exemption with progression. So India is the only country that really taxes the rent. The one thing to note is that the property still counts for the Swiss wealth tax, and its value can raise your wealth-tax rate even though the rent is income-tax-exempt.

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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, at about 30% plus surcharge and cess, far higher than the small rate that applies to a resident landlord. That 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.

Switzerland exempts the rent

Switzerland taxes its residents on worldwide income, but it makes a specific exception for foreign real estate. The income from your Indian property is exempt from Swiss income tax; it is declared, but only so that it can be counted in setting the rate that applies to your Swiss-taxable income. This is exemption with progression, so the Indian rent is not itself taxed in Switzerland; it may just nudge up the rate on the rest of your income.

So the practical result is clean: India taxes the rent, and Switzerland does not, only raising its own rate slightly. India's tax after the 30% deduction is the real cost. The one thing to carry forward is that this exemption is for income tax. The property itself still enters the Swiss wealth tax, where its value, though excluded from the taxable base as foreign real estate, is used to set your wealth-tax rate, so it is not entirely off the Swiss radar. A practising CA files the Indian return, recovers the over-deducted TDS, and gives your Swiss accountant the rent figure for the progression and the property value for the wealth tax.

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 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.

  3. 3

    We provide the progression figure

    We give your Swiss accountant the exempt Indian rent so the progression on your Swiss income is right.

  4. 4

    We supply the wealth-tax value

    We provide the property value for the Swiss wealth-tax declaration, since the property affects the rate.

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 property's value, for the Swiss wealth tax
  • Your PAN and Swiss 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 at ~30%
  • Switzerland does not tax foreign real-estate income; it is exempt and only counted to set the Swiss rate (progression)
  • So India is the only country that actually taxes the rent
  • The property still counts for the Swiss wealth tax and can raise the wealth-tax rate

Frequently asked questions

Common questions

No, not directly. Foreign real-estate income is exempt in Switzerland and only counted to set the rate on your Swiss income. So India's tax on the rent is the only real tax; Switzerland just raises its own rate slightly.

No. Section 195 TDS is on the gross rent at about 30%, before your 30% deduction, so it over-deducts. You recover the excess by filing an Indian return, or reduce it up front with a lower-deduction certificate.

Not on the rent, but the property counts for the Swiss wealth tax. Its value is excluded from the taxable base as foreign real estate, but it is used to set your wealth-tax rate, so it still affects your Swiss position.

Because a non-resident landlord's rent is taxed under Section 195 at about 30%, not the low resident rate. It is only withholding, so a lower-deduction certificate or an Indian return brings it down to your real tax.

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.

TDS on rent paid to an NRI landlord

Right now: 30% plus surcharge and cess under s.195

Where it works differently

The tenant applies s.194-I (10%) or s.194-IB (5%)
Wrong section. Both are resident-payee provisions; rent to a non-resident falls under s.195.
The tenant becomes an assessee-in-default under s.201 for the shortfall.
There is no threshold
s.195 has no minimum. Even Rs 8,000 a month of rent attracts deduction.
Unlike 194-I (Rs 2.4 lakh) and 194-IB (Rs 50,000 a month).
The landlord obtains a Form 13 certificate
The AO can certify a much lower rate reflecting the 30% standard deduction and interest, often into single digits.
s.197. This is the standard fix for NRI landlords.
The tenant is an individual with no TAN
They must still obtain a TAN to deduct under s.195. This is the practical reason NRI landlords lose tenants.
s.203A.

Commonly got wrong

  • Tenants deduct 10% TDS on rent under s.194-I. That applies to resident landlords. For an NRI landlord the section is 195 at 30% plus surcharge and cess.If your landlord is an NRI you deduct under section 195 at 30% plus surcharge and cess, you need a TAN, and there is no minimum threshold. The landlord can lower it with a Form 13 certificate.

Related

If this matched your situation, these go further

Selling Indian property while you are a Swiss tax residentThe Swiss wealth tax and your Indian assetsProving 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 Swiss tax return?

Send us the rent and the TDS. A practising CA will file the Indian side and give your Swiss accountant the figures on a free call, no obligation.

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