Ashish Thapliyal stays in a three-bedroom flat in Civil Lines area of north Delhi and pays monthly rent of ₹60,000. Before transferring the rent, he makes sure to deduct ₹3,000 TDS (tax deducted at source at the rate of 5 percent) on this amount.
However, his friend Parvesh — who stays in a relatively smaller flat in the neighbourhood and pays ₹43,000 rent — doesn’t need to do this.
Where does the difference lie?
Well, it lies in the fact that the rental outgo of Ashish is more than ₹50,000 vis-à-vis Parvesh’s.
As a matter of fact, there is an income tax provision under section 194I-B that statesall individuals or Hindu Undivided Families (HUFs) who are paying monthly rent to a resident in excess of ₹50,000 are liable to deduct TDS.
“It is the responsibility of tenant to deduct the TDS when their monthly outgo is above ₹50,000. Well, I don’t deny that there could be occasions when the landlord would not be cooperative but tax accrual will happen anyway. So, it is imperative that tenant procures these details from them, and adhere to the tax rules as per section 194-IB and deduct 5 percent TDS,” says Deepak Aggarwal, a Delhi-based chartered accountant and financial advisor.
Tenants should take care of the following:
1. Everyone — individuals or HUFs whose monthly rent is more than ₹50,000 — is liable to deduct TDS under section 194-IB.
2. They are meant to deduct income tax at the rate of 5 percent from the rent payment made to the landlord.
3. They ought to collect the landlord’s PAN.
4. It is vital that PAN of the landlord as well as of tenant be furnished in the online form for furnishing information regarding the rent.
5. The tenant should download and furnish TDS certificate in Form 16C from TRACES and issue to the landlord in a span of 15 days from the due date of furnishing of the challan-cum-statement in Form 26QC.
Landlords must remember these things:
1. They must share their PAN with the tenant for furnishing information regarding TDS to the Income Tax Department.
2. They can verify the deposit of taxes which is deducted by the tenant in form 26AS statement.
3. They should procure form 16C from the tenant which is downloaded from TRACES website.
So, next time you make payment to your landlord, do not forget to deduct the tax deducted at source when it is more than ₹6 lakh, and also issue TDS certificate to the landlord.