Short Answer: The main limits are: the property must be available for rent, losses can’t be artificial, and there’s no “ring-fencing” for overseas properties (losses can offset any income).

Long Answer: Unlike NZ residential properties (which have loss ring-fencing rules since 2019), overseas rental properties aren’t subject to ring-fencing. This means losses can fully offset salary, business, or investment income. However, the IRD may challenge claims if: 1) The property isn’t genuinely available for rent at market rates, 2) Expenses are inflated or private in nature, 3) The loss-making pattern continues indefinitely without prospect of profit. Maintain a clear business purpose and documentation.

Short Answer: Your tenant/property manager deducts 30% TDS (plus cess) in India. You claim this as a foreign tax credit in your NZ return to avoid double taxation.

Long Answer: Under Indian tax law, tenants must deduct TDS at 31.2% (30% + cess) on rent above certain thresholds. This tax is paid to the Indian government on your behalf. In your NZ return, you declare the GROSS rental income, deduct all expenses, then calculate NZ tax on the net profit. You then claim the Indian TDS as a foreign tax credit against your NZ tax liability. If Indian tax exceeds NZ tax on that income, you get a refund or credit for the difference. Keep Form 26AS as proof.

Short Answer: Yes, interest on loans used to purchase or improve the rental property is fully deductible, even if the loan is from an Indian bank.

Long Answer: Interest expense is typically your largest deduction. You can deduct interest on:

• Mortgages from Indian banks (HDFC, SBI, etc.)
• Loans from Indian family members (at market interest rates)
• NZ loans used to purchase Indian property

The key is that the loan must be used to acquire or improve the rental property. If you refinance or redraw, trace the use of funds. Convert the INR interest to NZD using the average exchange rate for the period or specific payment dates.

Short Answer: Repairs restore something to its original condition and are deductible. Improvements add value or extend life and must be capitalized (added to property cost).

Long Answer: Examples:

• Repairs (Deductible): Fixing leaks, repainting walls, replacing broken tiles, servicing AC units.
• Capital Improvements (Capitalized): Renovating kitchen, adding a room, installing new flooring throughout, adding a balcony enclosure.

Capital improvements increase the property’s cost base, which reduces capital gains tax when you sell. They may also qualify for separate depreciation. The distinction is often subjective – when in doubt, be conservative and capitalize significant expenditures.

Short Answer: During vacancies, you still declare zero rental income but can continue claiming most expenses (except those specifically tied to occupancy).

Long Answer: Vacancy periods are normal. You can still deduct:

• Interest on mortgage
• Property taxes
• Insurance
• Maintenance charges
• Depreciation
• Advertising for new tenants

However, you cannot deduct expenses that require occupancy, like utility bills paid by landlord. Keep records showing the property was genuinely available for rent during vacancy (advertising, property manager communications).

Short Answer: You can only deduct expenses up to the amount of rental income received. No loss can be claimed, and market rate imputation may apply.

Long Answer: Renting to family below market rate is considered a private arrangement. The IRD will limit your deductions to the actual rental income received – you cannot create or claim a loss. In some cases, they may deem the market rental value as income regardless of what you actually charge. This severely limits negative gearing benefits. To claim full deductions, charge market rent with a formal agreement, and actually collect it.

Short Answer: Yes, monthly maintenance charges to housing societies or resident welfare associations are fully deductible operating expenses.

Long Answer: These fees for common area maintenance, security, lift maintenance, etc., are directly related to earning rental income and are deductible. Ensure you get proper receipts from the society/association. If the fees include contributions to a sinking fund for future capital works, that portion may need to be capitalized rather than expensed. Request a breakdown from the society if possible.

Short Answer: The DTA allows both countries to tax rental income, but India gets first right with 30% TDS, while NZ taxes with credit for Indian tax paid.

Long Answer: Article 6 of the India-NZ DTA states income from immovable property may be taxed in the country where the property is situated (India). However, as a NZ resident, you’re also taxable in NZ. The DTA prevents double taxation by allowing you to claim credit in NZ for tax paid in India. The effective result: you pay the higher of the two countries’ tax rates on that income.

Short Answer: Keep everything for 7+ years: tenancy agreements, receipts, bank statements, loan documents, Form 26AS, repair invoices, travel records, and depreciation schedules.

Long Answer: Your records should prove:

• Income: Rental agreements, bank deposit records, Form 26AS for TDS
• Expenses: All invoices/receipts, loan statements showing interest, property tax bills
• Asset purchases: Purchase agreement for property, invoices for chattels
• Travel: Flight tickets, accommodation bills, diary of property activities
• Calculations: Exchange rate records, depreciation schedules, expense apportionments

Digital copies of Indian documents are acceptable if clear and accessible.

Short Answer: You should make a voluntary disclosure to the IRD immediately to reduce penalties. Seek professional help for back-year filings.

Long Answer: Unreported foreign rental income is a serious omission. Penalties can be 20-40% of tax owed plus interest. By making a voluntary disclosure before the IRD contacts you, you can reduce penalties by 75-100%. A tax professional can help calculate back taxes, prepare amended returns, and manage the disclosure process. Don’t wait – the IRD receives increasing information from India under CRS data sharing.

Short Answer: No, your own time and labor have no deductible value. You can only deduct actual out-of-pocket expenses.

Long Answer: Unlike a business, you cannot place a value on your personal time spent managing the property (screening tenants, coordinating repairs, etc.). This is considered a personal contribution. However, you can deduct costs of hiring others (property managers, accountants, lawyers) to do this work. This is why many owners use property management companies – the fee is deductible and saves personal time.

Short Answer: Indian GST paid on expenses (like repairs, professional fees) is generally not recoverable in your NZ return but can be included as part of the expense cost.

Long Answer: New Zealand GST and Indian GST are separate regimes. You’re not registered for Indian GST as a residential landlord, so you can’t claim input credits in India. For NZ tax purposes, include the GST-inclusive cost of expenses in your deductions (since it’s part of what you paid). There’s no mechanism to separately claim foreign GST credits in your NZ income tax return.

Short Answer: Each owner declares their share of net rental income/loss in their individual NZ tax returns based on ownership percentage.

Long Answer: If you own 50% of a Mumbai flat, you declare 50% of gross rent, 50% of expenses, and 50% of depreciation. All owners need to coordinate to ensure total deductions don’t exceed 100% of expenses. Keep the ownership document (sale deed) showing percentages. If co-owners are non-NZ residents, they have different tax obligations in their countries of residence.

Short Answer: Yes, professional fees for Indian tax compliance related to the rental property are deductible in your NZ return.

Long Answer: Fees paid to Indian CAs for filing your Indian tax return (which includes rental income), obtaining tax certificates, or advice specifically about the rental property’s tax treatment are deductible. Similarly, NZ accountant fees for preparing the overseas rental portion of your NZ return are deductible. Keep all invoices and ensure they clearly relate to the rental property.

Short Answer: When you sell, previously claimed depreciation may be added back to your income as “depreciation recovery income” if you sell for more than the adjusted tax book value.

Long Answer: Depreciation reduces your property’s tax book value. If you sell for more than this depreciated value, the difference (up to total depreciation claimed) is taxable as ordinary income in the year of sale. This is in addition to any capital gain. For example: Buy for ₹1 crore, claim ₹10 lakh depreciation, tax book value = ₹90 lakh. Sell for ₹1.1 crore. Depreciation recovery = ₹10 lakh (taxable as income), capital gain = ₹10 lakh (may be taxable depending on rules).

Short Answer: Use the Reserve Bank of NZ (RBNZ) monthly average exchange rates or specific transaction date rates. Be consistent year-to-year.

Long Answer: Two acceptable methods: 1) Specific Date Rate: Use the RBNZ rate on the exact date of each transaction (best for large expenses). 2) Average Rate: Use the RBNZ monthly average for the month of transaction, or the annual average for the tax year. The annual average simplifies calculations but may not be precise. Choose one method and stick to it. Document your source (RBNZ website screenshots or printed rates).

Short Answer: No, travel from your NZ home to India is considered capital/initial travel to the asset location, not deductible as a recurring expense.

Long Answer: The cost of traveling from your NZ residence to your Indian property is generally not deductible, as it’s considered travel to the “place of business” or asset location. However, once in India, local travel between the airport and property, or between multiple properties, is deductible. Some tax advisors argue a portion of international travel might be deductible if the sole purpose is property inspection, but this is contentious and often challenged by IRD.

Short Answer: Foreign exchange gains/losses on the loan principal are generally not taxable/deductible, but interest expense is deductible when paid.

Long Answer: Fluctuations in the INR/NZD exchange rate affect your loan balance in NZD terms, but these are usually not taxable events until you repay the loan. The interest expense, however, is deductible each year based on the NZD value when paid. If the loan is from a family member at low or zero interest, the IRD may impute market-rate interest for deduction purposes (meaning you can only deduct what would be market rate, not the actual lower amount).

Short Answer: Advance rent is taxable when received. Security deposits are not income if refundable, but interest earned on them is taxable.

Long Answer: If you receive 6 months rent in advance, all 6 months are taxable in the year received (cash basis accounting applies to most rental properties). Security deposits (typically 1-3 months rent) are not income when received if refundable. However, if you place the deposit in an interest-bearing account, the interest earned is taxable rental income. When you refund the deposit, it’s not an expense deduction.

Short Answer: No, you cannot claim imputed or notional rent as an expense. Only actual lost rent and actual expenses are considered.

Long Answer: Some owners think they should be able to deduct “market rent” they could have earned during vacancies. This is not allowed. You can only deduct actual expenses during vacancy periods. The inability to claim notional rent is why vacancies directly increase losses – you have expenses but no offsetting income.

Short Answer: You stop declaring rental income and deducting expenses. Any depreciation recovery may be triggered, and future use affects capital gains calculation.

Long Answer: When you stop renting the property (e.g., use it for family or leave vacant), it’s no longer a rental activity. You cannot claim expenses or depreciation from that date. If the market value at conversion exceeds the tax book value, you may have depreciation recovery income. When you eventually sell, the period of personal use affects capital gains tax calculations under the “bright-line” type tests for overseas properties.

Short Answer: Strongly recommended, especially for initial setup, depreciation calculations, negative gearing optimization, and dealing with past non-compliance.

Long Answer: The intersection of Indian property law, Indian tax, and NZ tax creates complexity few general accountants handle well. A specialist can: ensure correct depreciation rates and methods, maximize legitimate deductions, optimize negative gearing benefits, correctly handle foreign tax credits, prepare voluntary disclosures if needed, and represent you in IRD audits. The fee is tax-deductible and often pays for itself in optimized outcomes and risk reduction.