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

I am a non-resident Indian residing abroad for past 20 years. I have 2 flats at different locations in India. One flat is in my name and another one is in my wife’s name. Both the flats are let out. We receive rent amounted to 25K for every month for each flat. We have PAN. Is it necessary to file income tax returns every year? Is this rental income taxable?

You are not required to file an ITR just because you have a PAN. You have to file your ITR if your income which is taxable in India exceeds the basic exemption limit or you satisfy any of the non-income based criteria which require you to file an ITR even if your income does not the basic exemption.

I presume that both the flats owned by you and your wife respectively were bought by you and your wife from your respective resources and therefore the rental income in respect of these flats is taxable in your respective hands. 

I presume that you do not have any other income taxable in India and the taxable income in respect of rentals for each flat comes to Rs. 2.10 lakhs after deducting 30% as standard deduction under Section 24, from the annual rental of Rs. 3 lacs. Since this is below the exemption limit of Rs. 2.50 lakhs you are not required to file your income tax return unless you are hit by other conditions requiring you to file an ITR in India. 

In case both the flats were purchased by you from your funds and one is held in your wife’s name just for the name sake, income in respect of both the flats shall become taxable in your hand due to clubbing provisions and since the income of both the flats taken together will exceed the basic exemption limit and you will have to pay tax and file your income tax return here in India. This rental income may also become taxable in country of your residence.

Please note that since you are a non-resident, your tenant is required to deduct tax from the rent being paid to you under Section 195 without there being any threshold exemption. Please disclose your residential status to your tenants to be fully compliant.

Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on twitter.

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