I am non-resident Indian, own flats that are rent out. How income will be taxed

I am a non-resident Indian living abroad for 20 years. I have 2 apartments in different locations in India. One apartment is in my name and another in my wife’s name. Both apartments are rented. We receive rent of 25,000 monthly for each apartment. We have PAN. Do I have to file an income tax return every year? Is this rental income taxable?

You don’t have to file an ITR just because you have a PAN. You must file your ITR if your taxable income in India exceeds the basic exemption limit or you meet any of the non-income based criteria that oblige you to file an ITR even if your income is not covered by the basic exemption.

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I understand that both of your and your wife’s homes were purchased by you and your wife out of your respective funds and therefore the rental income in respect of those homes is taxable in your respective hands.

I am assuming you have no other income taxable in India and the taxable income in relation to rent for each apartment is Rs. 2.10 lakhs after deducting 30% as a standard Section 24 deduction from the annual rental of Rs. 3 laces. As this is under the exemption limit of Rs. 2.50 lakhs you are not required to file your income tax return unless you are affected by other conditions that compel you to file an ITR in India.

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If both homes were purchased by you from your assets and one is in your wife’s name for naming reasons only, the income in respect of both homes will be taxable in your hands due to clubbing regulations and since the combined income of both homes exceeds the basic allowance and you need to pay tax and file your income tax return here in India. This rental income may also become taxable in your country of residence.

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Please note that since you are not a resident, without a threshold exemption, your renter is required to deduct taxes from rent paid to you under Section 195. Please advise your tenants of your housing status to be fully compliant.

Balwant Jain is a tax and investment professional and can be reached at [email protected] and @jainbalwant on Twitter.

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