Rental Income from India: US Tax Reporting

If you own a flat or house in India and rent it out, the United States counts the rent as part of your worldwide income whenever you are a U.S. citizen, green card holder or other U.S. tax resident. Being overseas does not change that. It does change a few rules: the currency, the depreciation period and the credit for Indian tax. If a parent lives in the property, special rules also limit what you can deduct. Indian tax on the rent, Indian return filing and tenant TDS compliance are governed by Indian law and handled with your Indian CA. This page covers the U.S. side.

Reporting the income and expenses

Convert rupees to dollars using the exchange rate when you receive the rent. The IRS has no official rate and generally accepts a posted rate used consistently; it also publishes yearly average rates that include India. Choose a method and stay with it.

Rent includes advance rent, which is income in the year you receive it. A security deposit you plan to return is not income, but any part you keep is. Common deductions are property taxes, society or maintenance charges you pay as owner, repairs, insurance, agent fees and interest on a loan for the property, plus depreciation. A vacant property that is held for rent keeps its deductible expenses.

Who owns the property matters more than who collects the rent. If the property is yours but your parents collect the rent, the income is still yours to report.

Depreciation: the 30-year rule

The IRS requires the Alternative Depreciation System for tangible property used mostly outside the United States. For residential rental property placed in service after 2017, that means straight-line depreciation over 30 years. This is longer than the 27.5 years used for U.S. rentals.

• Land cannot be depreciated. If your cost includes land, divide it between land and building.
• Depreciation starts when the property is ready and available for rent.
• When you sell, depreciation reduces your basis. See selling property in India.

When family lives in the property

The rules count as personal use any day the home is used by you or a family member (spouse, siblings, parents, grandparents, children and grandchildren), unless that person uses it as a main home and pays a fair rental price. They also count any day it is rented at less than a fair rental price. The IRS example says renting to your mother at less than a fair rental price is personal use.

Personal use has two effects. First, you divide expenses between rental and personal days. Second, if personal use is more than the greater of 14 days or 10% of the days rented at a fair price, the property is treated as a home and your deductions can be limited. If your parents live there for free, you generally have no rental activity at all. See rental property taxes for the general rules.

Losses

A rental loss may be limited by the passive activity rules (Form 8582) and the at-risk rules, which can delay the deduction until you have rental income or sell. Foreign property is not exempt from these rules.

The credit for Indian tax

Rent is sourced to the country where the property is, so it is foreign-source income. Indian tax you legally owe on it can be claimed on Form 1116, usually in the passive category. Final Indian tax is set by the Indian return, which may be filed after your U.S. year-end, and refundable amounts are not creditable. See foreign tax credit on India income.

Reporting your accounts

Real estate you own directly is not reported on Form 8938, which the IRS confirms applies even to a rental property. The Indian bank account that receives the rent is a different matter. It counts for the FBAR once your foreign accounts together exceed $10,000 (2025 and 2026 reports), and for Form 8938 if you pass that threshold. If the property is held through a company or trust, your interest in that entity is reportable. See owning an Indian business.

How we can help

We convert your rent and expenses, set up depreciation, apply the personal-use rules to family arrangements, and claim the foreign tax credit with the support your Indian CA provides. See our real estate tax services.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.