NRI Landlords in Bangalore: Net Rental Yield After TDS and Costs
An NRI who lets out a flat in Bangalore receives much less in the bank than the quoted rental yield suggests, at least in the first year. Running costs take one slice, and tax deducted at source by the tenant takes a larger one before the rent is paid. This guide works through the costs, the TDS rule for non-resident landlords, a full example and the steps that bring the cash flow back up.
Gross Yield Is Only the Starting Point
Gross rental yield is the yearly rent divided by the price of the home. A flat that cost Rs. 1.8 Crore and earns Rs. 55,000 a month has a gross yield of about 3.7%. The figure is useful for comparing two homes, but it assumes a tenant in every month and an owner with no expenses.
Net yield is the rent that remains after the costs of owning and letting. For an owner who lives abroad, a third figure matters as well: the cash that reaches the account during the year, after TDS. The three numbers are quite far apart, and a buyer should work out all of them before booking.
The Costs Every Landlord Pays
Running costs are the same for a resident and a non-resident owner. In a large gated community they are higher than many first-time investors expect. The main heads are listed below.
- Monthly maintenance to the owners' association, charged per sq ft and payable whether the flat is let or empty
- Vacancy between tenants, which commonly runs to a few weeks at each changeover
- Brokerage for finding a tenant, or a yearly fee to a property manager
- Property tax to the city corporation and insurance on the home
- Repairs, repainting and, in a furnished flat, the servicing and replacement of appliances
A property manager is close to a necessity for an owner overseas. The manager shows the flat, drafts the rental agreement, collects rent, handles repairs and returns the keys at the end of a tenancy. Fees differ from firm to firm, so ask for the full list of services in writing.
TDS on Rent Paid to a Non-Resident
Rent paid to a non-resident owner is subject to tax deduction at source on every payment. The tenant deducts tax at 30%, plus surcharge where it applies and a 4% cess, which makes at least 31.2% of the rent. The Rs. 50,000 a month threshold that applies to resident landlords has no role here, so even a modest rent is covered.
The rule moved to section 393 of the Income-tax Act, 2025 on 1 April 2026, and earlier it was section 195 of the 1961 Act. The duty rests on the tenant, who deposits the tax with the government and gives the owner a TDS certificate. A tenant who skips the deduction becomes liable for the tax and interest, so company tenants in particular insist on it.
TDS is an advance against the owner's tax, and the final bill is usually smaller. Rental income is taxed after deducting municipal taxes paid, a flat 30% of the remaining rent and interest on a home loan for the property. An owner with little other income in India often owes far less than 31.2% of the rent, and the excess is refunded after the return is filed.
A Worked Example
Take a 3 BHK of 1,600 sq ft bought for Rs. 1.8 Crore, all costs included, and let at Rs. 55,000 a month. The figures below are round numbers chosen to show the method, and each owner should replace them with actual quotes.
| Item | Per year |
|---|---|
| Rent for 12 months | Rs. 6.60 Lakhs |
| Gross yield on Rs. 1.8 Crore | 3.7% |
| One month of vacancy | Rs. 55,000 |
| Rent collected | Rs. 6.05 Lakhs |
| Maintenance at Rs. 5 per sq ft a month | Rs. 96,000 |
| Management fee at 8% of rent collected | Rs. 48,400 |
| Property tax and insurance | Rs. 15,000 |
| Repairs | Rs. 20,000 |
| Net rent before tax | Rs. 4.26 Lakhs |
| Net yield before tax | 2.4% |
| TDS at 31.2% of rent collected | Rs. 1.89 Lakhs |
| Cash received in the year | Rs. 2.37 Lakhs |
The gross yield of 3.7% becomes 2.4% after costs. The cash that arrives during the year is about 1.3% of the purchase price, because the tenant has held back Rs. 1.89 Lakhs as TDS. Most of that sum returns as a refund when the final tax is lower, but it arrives months after the financial year ends.
The example leaves out a home loan. Interest reduces the taxable rent, and the instalment reduces the cash in hand much further. Our EMI calculator shows the monthly figure to set against the rent.
Lowering the TDS at Source
An owner whose real tax is below the standard deduction rate may apply to the Assessing Officer for a lower deduction certificate. The provision is section 395 of the Income-tax Act, 2025, and it replaced section 197 of the old law. The application is filed online with an estimate of the year's income and tax.
Once issued, the certificate names the tenant and the rate, and the tenant deducts at that lower rate for the period it covers. It has to be renewed for each financial year and when the tenant changes. A chartered accountant in India usually handles the filing together with the yearly return.
Receiving and Repatriating the Rent
Rent in rupees is credited to the owner's NRO account. Rental income is current income, and banks allow it to be sent abroad once the tax on it has been paid. The bank will ask for the tax paperwork it needs, so keep the TDS certificates and the filed return in one place.
A PAN is essential, since the TDS credit, the tax return and the refund all depend on it. The country of residence may also tax the same rent and give credit for the Indian tax under a tax treaty. That part depends on the country, and it calls for advice there.
How to Underwrite a Purchase
A buyer who plans to let the home should build the model before paying the booking amount. The steps below keep the estimate honest.
- Work out gross yield on the full cost, including stamp duty, registration, GST and interiors.
- Take the maintenance rate from the association or the developer, and apply it for all 12 months.
- Assume at least one empty month in a year, and more in a newly handed over project.
- Add the management fee, property tax, insurance and a repair reserve.
- Deduct TDS at 31.2% to find the first-year cash flow, then plan the lower deduction certificate.
Rent is one half of the return, and price growth over the holding period is the other. A flat near a large office district in Bangalore tends to let faster, which cuts vacancy more than any other single choice. Our NRI services page explains how we help overseas buyers shortlist homes and complete the purchase.
The tax points in this guide are general information for the financial year 2026-27. Rates and procedures change with each Finance Act, so confirm the position with a tax adviser before acting.
