By Advocate Ketan Palshikar | Property Lawyer and Property Manager, Pune
Receiving rent from your Pune property when you live abroad is not as simple as receiving a bank transfer. Between the tenant paying rent and that money reaching your foreign account, there are legal obligations, compliance requirements, and a chain of documentation that — if not handled correctly — creates tax and FEMA problems that are expensive and time-consuming to resolve.
Most NRI landlords discover these complications after the fact. A CA tells them their remittance was non-compliant. A tax notice arrives about undeclared rental income. A tenant who was supposed to deduct TDS did not — and now the liability falls on the landlord.
This page explains exactly how rent collection and remittance works under this management arrangement — the process, the compliance obligations, the documentation, and what happens when a tenant does not pay on time.
On This Page
- The Rent Collection Process
- What Happens When Rent Is Late
- Monthly Accounting — What You Receive
- The NRO Account — What It Is and Why It Matters
- Remittance to Your Foreign Account — FEMA Compliance
- TDS on NRI Rental Income — The Obligation Most Tenants Do Not Know About
- Security Deposit — How It Is Held and Managed
- Income Tax on NRI Rental Income
- Common Mistakes
- FAQs
- Contact
The Rent Collection Process
Rent collection under this management arrangement follows a defined process — not an informal chase.
Payment Mode
Rent is collected by bank transfer only — NEFT, IMPS, or UPI transfer to the designated management account maintained by this office for your property. Cash payment is not accepted under any circumstances.
This is not merely a preference. For an NRI landlord, cash rent creates two specific problems: it cannot be documented for FEMA remittance purposes, and it creates no verifiable bank record for income tax compliance. A tenant who insists on paying cash is a tenant whose payments cannot be properly accounted for — which is your problem, not theirs.
The Leave and License Agreement explicitly states that bank transfer is the only accepted payment mode. A tenant who pays cash after the agreement specifies bank transfer is in breach of the agreement.
Payment to Management Account
Rent is paid to a designated management account maintained by this office. This account is separate from this office’s own funds — your rent is not commingled with other accounts. The account receives rent, makes approved property expenditures, and remits the net balance to your NRO account monthly.
A separate management account per property — or per client where multiple properties are involved — creates a clean, auditable financial record. Every rupee in and every rupee out is documented with a corresponding receipt or bank reference.
Payment Timeline
The rent due date is specified in the Leave and License Agreement — typically the 1st of each calendar month. Rent received is confirmed to you by WhatsApp and email on the day of receipt.
If rent is not received by the due date, the process described in the next section begins immediately — not after a week of informal follow-up.
What Happens When Rent Is Late
Late rent is handled through a defined escalation protocol — not informal messages that create no record and apply no real pressure.
Day 1-3 after due date:
Written reminder to tenant by WhatsApp and email. The reminder cites the due date per the agreement and requests payment confirmation. You are copied.
Day 7:
If payment has not been received, a formal written notice is issued citing the specific payment clause of the Leave and License Agreement, the amount due, and the deadline for payment. The notice is documented — it is not a casual message.
Day 15:
If payment remains outstanding, an Advocate’s legal notice is issued under professional signature. This notice demands payment of all outstanding amounts — including any interest as specified in the agreement — and puts the tenant on formal notice that legal proceedings will follow if the demand is not met. Your instructions are sought before this notice is issued.
Day 30 onwards:
If the legal notice has not produced payment, the matter is escalated according to your instructions. Options — negotiated settlement, recovery proceedings, termination of licence — are explained with realistic timelines and costs. The decision is yours.
Throughout this process, every communication is documented. The escalation record — dates, notices, responses — is the evidence base for any subsequent legal proceedings.
Monthly Accounting — What You Receive
By the 7th of each month, you receive the financial summary for the preceding month. This is not a one-line statement — it is an itemised account of every transaction in the management account relating to your property.
The monthly financial statement covers:
| Item | Detail Provided |
|---|---|
| Opening balance | Balance carried from previous month |
| Rent received | Amount, date, tenant bank reference |
| Society maintenance paid | Amount, month covered, receipt number |
| Property tax payment | Amount, period covered, receipt number |
| Utility payments | Itemised by utility, amount, reference |
| Maintenance expenditure | Itemised by work, contractor, invoice number |
| Management fee | Amount per agreed arrangement |
| Net remitted to NRO account | Amount, date, bank reference |
| Closing balance | Balance held, if any |
Every line item has a corresponding document — receipt, invoice, or bank reference. These are attached to the monthly statement or available on request within 48 hours.
There are no unexplained deductions. Every amount taken from the management account is documented with a purpose and a reference. If you see a line item that requires explanation, you ask — and you receive a specific answer with supporting documentation.
The NRO Account — What It Is and Why It Matters
An NRO — Non-Resident Ordinary — account is a rupee-denominated bank account that NRIs maintain in India for receiving income from Indian sources. Rental income from Indian property must be credited to an NRO account — not to an NRE account directly, and not to a foreign account directly.
Why rental income must go to the NRO account first:
Under FEMA regulations, income earned in India — including rental income — is Indian-sourced income. It must be received in India in rupees. The NRO account is the correct account for this purpose.
NRO vs NRE — the key differences:
| Feature | NRO Account | NRE Account |
|---|---|---|
| Currency | Indian Rupees | Indian Rupees (but freely repatriable) |
| Source of funds | Indian income — rent, dividends, pension | Foreign income remitted to India |
| Repatriability | Repatriable subject to limits and documentation | Freely repatriable |
| Tax on interest | Taxable in India | Tax-free in India |
| Rental income | Correct account | Cannot receive rental income directly |
What NRIs frequently get wrong:
Some NRI landlords instruct their tenant or their property manager to remit rent directly to their foreign account — bypassing the NRO account entirely. This is a FEMA violation. The rental income must be received in the NRO account first. Remittance abroad from the NRO account then follows the proper compliance process.
If you do not have an NRO account:
Opening an NRO account is a prerequisite for this management arrangement. Most major Indian banks — SBI, HDFC, ICICI, Axis, Kotak — allow NRO account opening with KYC documentation. Some banks allow the process to be initiated from abroad. We assist with the documentation requirements where needed.
Remittance to Your Foreign Account — FEMA Compliance
Once rental income is in your NRO account, remittance abroad is governed by the Foreign Exchange Management Act, 1999 and RBI regulations.
Annual remittance limit:
NRIs can remit up to USD 1 million per financial year from their NRO account, subject to payment of applicable taxes and submission of required documentation. For most NRI landlords with a single Pune property, annual rental income is well within this limit.
Documentation required for remittance:
The bank requires specific documentation before processing remittance from an NRO account:
- Form 15CA — an online declaration filed by the remitter on the Income Tax portal before remittance
- Form 15CB — a certificate from a Chartered Accountant certifying that taxes have been paid or are not applicable on the amount being remitted
- Source documentation — evidence that the funds are from rental income (rent receipts, management statements)
Our role in the remittance process:
We coordinate with your CA to ensure that the management account records — rent statements, receipts, monthly financial summaries — provide the documentation needed for Form 15CB certification. We do not file Form 15CA or issue Form 15CB — these are CA functions. What we provide is the source documentation that makes the CA’s work straightforward.
If you do not have a CA in India, we can refer you to one who works regularly with NRI clients. We do not charge for this referral.
Remittance frequency:
Monthly remittance to your NRO account is the standard arrangement. Remittance abroad from the NRO account is typically done annually or quarterly — based on your CA’s advice on the optimal timing from a tax and compliance perspective. The management arrangement remits to your NRO account monthly — what you do with those funds from the NRO account is coordinated with your CA.
TDS on NRI Rental Income — The Obligation Most Tenants Do Not Know About
This is the compliance area that creates the most problems for NRI landlords — not because the law is unclear, but because it is widely unknown.
The legal obligation:
Under Section 195 of the Income Tax Act, 1961, any person making a payment to a non-resident that is chargeable to tax in India is required to deduct TDS at the applicable rate before making payment. Rental income paid to an NRI landlord falls squarely within this provision.
This means: your tenant is legally required to deduct TDS from the rent they pay you.
This is different from the TDS obligation on rent paid to a resident Indian landlord under Section 194I — which applies only where annual rent exceeds ₹2.4 lakhs and the tenant is not an individual or HUF below the tax audit threshold. Section 195 applies to all payments to non-residents — there is no minimum threshold.
The applicable TDS rate for NRI landlords:
The rate depends on the nature of income and applicable Double Taxation Avoidance Agreement (DTAA) between India and your country of residence. In the absence of DTAA benefit, the rate under Section 195 can be 30% plus applicable surcharge and cess on the gross rental amount — significantly higher than the rate applicable to resident landlords.
DTAA benefits — which can reduce this rate — require specific documentation including a Tax Residency Certificate from your country of residence and Form 10F. We advise on the DTAA position relevant to your country of residence.
What the tenant must do:
- Deduct TDS at the applicable rate from each rent payment
- Deposit the deducted TDS with the government using Challan 281 within the prescribed time
- File TDS returns quarterly — Form 27Q for payments to non-residents
- Issue Form 16A to you annually — the TDS certificate that you use to claim credit when filing your Indian income tax return
What happens when the tenant does not deduct TDS:
Non-deduction of TDS does not eliminate the tax liability. The Income Tax department can treat the net rent received as a gross amount and demand tax plus interest plus penalty — from both the tenant (for non-deduction) and from you (for non-compliance). This is a situation that is significantly more expensive to resolve than to prevent.
How we address this:
At the tenancy documentation stage, we explain the TDS obligation to the tenant in plain language. The Leave and License Agreement acknowledges the tenant’s TDS obligation. We provide the tenant with your PAN and other details required for TDS filing. We confirm at each rent receipt whether TDS has been deducted and follow up if it has not.
A tenant who persistently fails to deduct TDS despite written reminders is in breach of their statutory obligation — and this is documented in the management record.
Security Deposit — How It Is Held and Managed
The security deposit collected from the tenant at the start of the tenancy is held separately from the rent management account.
How the deposit is held:
The security deposit is held in a designated account — separate from the management account and separate from this office’s own funds. It is your money, held in trust. It earns no interest under the standard arrangement — the deposit amount is the amount that will be returned to the tenant at the end of the tenancy, subject to deductions.
When the deposit can be applied:
The conditions for applying the deposit are stated in the Leave and License Agreement. Typically:
- Unpaid rent — after the escalation process has been followed and rent remains outstanding
- Property damage beyond normal wear and tear — after the move-out inspection and damage assessment
- Outstanding utility bills or society dues attributable to the tenant
The deposit is not applied without your knowledge and approval — except in the specific situations defined in the agreement where application is automatic.
Deposit refund process:
After the tenant vacates:
- Move-out inspection is conducted
- Damage assessment is prepared
- Deductions are calculated and documented
- Remaining balance is refunded to the tenant within the timeline stated in the agreement — typically 30 days of vacation
If the tenant disputes the deductions, the documented inspection record — photographs, condition reports — is the evidence. Disputed deductions are not resolved by releasing the full deposit and arguing later. The process for resolving a genuine dispute is explained to both parties at the point of dispute.
Deposit adequacy:
A security deposit that is insufficient to cover likely risks — typically less than two months’ rent for an unfurnished property — is a problem that cannot be corrected after the tenant is in. We assess deposit adequacy at the tenancy documentation stage and recommend an appropriate amount. If the tenant resists a reasonable deposit, that resistance is itself information about the tenant.
Income Tax on NRI Rental Income
Rental income from Indian property is taxable in India regardless of your country of residence. This is not a discretionary compliance — it is a statutory obligation.
How rental income is taxed:
Gross rental income is reduced by:
- Standard deduction of 30% of net annual value — available without proof of actual expenditure
- Municipal taxes paid — property tax paid during the year
- Interest on home loan — if any, subject to applicable limits
The net figure is added to your other Indian income and taxed at applicable slab rates.
TDS credit:
TDS deducted by your tenant and deposited with the government is credited against your tax liability when you file your Indian income tax return. Form 16A issued by the tenant is the document that evidences this credit.
Annual filing requirement:
NRIs with taxable income in India — including rental income — are required to file an income tax return in India annually. The filing deadline is July 31 of the assessment year for most NRI filers, subject to extensions announced by the Income Tax department.
We do not provide income tax filing services. Coordination with your CA for annual filing is recommended — and the monthly financial statements from this office provide the documentation your CA needs.
Common Mistakes
1. Accepting cash rent
Untraceable, non-compliant for FEMA purposes, and creates no documented record for income tax. Cash rent is not accepted under this management arrangement — the agreement prohibits it.
2. Receiving rent directly into a foreign account
A FEMA violation. Rental income from Indian property must be received in an NRO account in India first. Direct foreign account credit bypasses the required compliance chain.
3. Not following up on TDS deduction
A tenant who is not deducting TDS is creating a compliance problem that grows every month. Each missed deduction is a fresh violation. The problem does not resolve itself — it accumulates.
4. Not filing Indian income tax returns
Some NRI landlords believe that because TDS has been deducted, no filing is required. TDS deduction and income tax filing are separate obligations. If your total Indian income exceeds the basic exemption limit, filing is required regardless of TDS.
5. Treating security deposit as income
The security deposit is not income — it is a refundable amount held in trust. Treating it as income creates accounting confusion and potential tax problems. The deposit is held separately and accounted for separately throughout the tenancy.
6. Not obtaining Form 16A from the tenant
Form 16A is the document that evidences TDS credit in your income tax return. Without it, you cannot claim the credit — meaning you may pay tax on income that was already taxed at source. Obtaining Form 16A from the tenant annually is a specific requirement we follow up on.
7. Using a relative’s Indian account to receive rent
Some NRI landlords route rent through a relative’s Indian bank account for convenience. This creates income in the relative’s hands — which they may not declare — and removes the FEMA compliance chain entirely. It is not a recommended arrangement.
Frequently Asked Questions
1. My tenant is paying rent but not deducting TDS. What should I do?
The tenant’s TDS obligation under Section 195 of the Income Tax Act is a statutory requirement — it is not optional and cannot be waived by agreement between landlord and tenant. If your tenant is not deducting TDS, they are in violation of their statutory obligation. The immediate step is a written notice to the tenant — citing Section 195 and the specific obligation — demanding compliance going forward. For past months of non-deduction, the tenant must deposit the outstanding TDS with applicable interest. We handle this communication as part of the management arrangement. If the tenant refuses to comply, this is a material breach of the tenancy arrangement.
2. Can I avoid TDS by claiming DTAA benefit?
DTAA benefits can reduce the applicable TDS rate — not eliminate TDS entirely in most cases. The reduction depends on the specific DTAA between India and your country of residence, the nature of the income, and the documentation provided. To claim DTAA benefit, you must provide your tenant with a Tax Residency Certificate from your country of residence and a completed Form 10F. We assist with identifying the applicable DTAA position and the documentation required. A CA with NRI tax expertise should confirm the applicable rate for your specific situation.
3. How long does it take for rent to reach my foreign account after the tenant pays?
The timeline has two stages. First, rent received in the management account is remitted to your NRO account — typically within 5-7 business days of receipt. Second, remittance from your NRO account to your foreign account depends on Form 15CA/15CB processing and your bank’s remittance processing time — typically 7-10 business days. The total timeline from rent receipt to foreign account credit is therefore typically 2-3 weeks. Many NRI landlords prefer to accumulate several months of rent in the NRO account and remit quarterly or annually — which reduces the Form 15CA/15CB filing frequency and your CA’s compliance burden.
4. What if my tenant pays rent for some months and skips others — irregular payments?
Irregular payment is addressed through the escalation protocol described above. Each missed month triggers the process — reminder, formal notice, legal notice. The management account maintains a running ledger of amounts due and amounts received, so the arrears position is always clear. We do not allow arrears to accumulate without formal documentation — each missed payment is formally recorded and notified to the tenant in writing.
5. I have two properties in Pune — can both be managed through a single management account?
Two properties can be managed under the same arrangement, but the accounts are maintained separately — a separate ledger for each property. This ensures that the income and expenditure for each property is clearly documented for tax and FEMA purposes. The monthly statement covers each property separately, with a consolidated summary if required.
6. My tenant is a company — does TDS work differently for corporate tenants?
Yes. A corporate tenant paying rent to an NRI landlord has a TDS obligation under Section 195 regardless of the rent amount. Corporate tenants generally have in-house finance or compliance teams who are familiar with TDS obligations — and are less likely to be unaware of the requirement than individual tenants. However, the applicable rate, DTAA documentation requirements, and filing process are the same. We clarify the specific requirements with corporate tenants at the agreement stage.
7. What happens to rent collection if the tenant vacates mid-month?
Rent for a partial month is calculated on a pro-rata basis — number of days occupied divided by total days in the month, multiplied by the monthly licence fee. The Leave and License Agreement specifies this calculation method. The final month’s rent is settled against the security deposit after the move-out inspection and damage assessment — the net amount due to or from the tenant is calculated and settled before the deposit is released.
8. Can I instruct you to hold rent in the management account rather than remitting monthly to my NRO account?
Yes, with specific written instructions. Some NRI landlords prefer to accumulate rent in the management account for a defined period — typically a quarter — before remittance to the NRO account. This is operationally straightforward. The management account statement reflects the accumulated balance, and remittance is made on your instruction. The compliance implications — Form 15CA/15CB, annual remittance limits — are the same regardless of whether remittance is monthly or quarterly.
9. My property is jointly owned with my spouse who is also an NRI. How does rent accounting work for joint ownership?
Joint ownership means rental income is split between the owners in proportion to their ownership share. Each owner’s share of rental income is separately accountable for income tax purposes. Both owners’ PAN details are required for the management arrangement. TDS deduction by the tenant should cover both owners’ shares. The management accounting reflects the split, and remittance to each owner’s NRO account is made in proportion to their ownership share.
10. What if I want to use some of the rent for property improvement rather than remitting it abroad?
Rent held in the management account can be applied to property improvement expenditure with your written instruction. The expenditure is documented with invoices and photographs as with any maintenance expenditure. The remaining balance after expenditure is remitted to your NRO account. There is no FEMA issue with applying Indian rental income to Indian property expenditure — the FEMA compliance requirements apply to remittance abroad, not to expenditure in India.
Areas We Cover in Pune
This service covers the entire Pune PMC and PCMC area. Properties in gram panchayat areas or outside Pune district are not covered.
Localities we regularly serve: Kothrud, Aundh, Baner, Bavdhan, Pashan, Wakad, Hinjewadi, Viman Nagar, Kalyani Nagar, Koregaon Park, Hadapsar, Kondhwa, Undri, Karve Nagar, Shivajinagar, Deccan, Erandwane, Camp, Pimpri-Chinchwad, Talegaon Dabhade, Lonavala and surrounding areas within PMC/PCMC limits.
Contact
Advocate Ketan Palshikar
Property Lawyer and Property Manager, Pune
14, Eiffel Square, 1530, Sadashiv Peth, Off Tilak Road, Pune – 411030
Phone / WhatsApp: +91 9325624069
Email: palshikar.ketan@gmail.com
Website: palshikarlegal.in
If your current rent collection arrangement is informal — cash payments, no TDS compliance, rent going directly to a foreign account — the cost of correcting this now is significantly less than the cost of addressing a tax or FEMA problem later.
Your property. Our legal responsibility.