Paying Over Rs 50,000 in Rent? Read This
Rates of properties in India's big cities might not have appreciated in the past couple of years, but the same is not true of renting costs. Rents in most cities have been consistently rising. The trend is more prominent in the prime localities of these cities. Now, if you are one of those who pay a monthly rent of over Rs 50,000, this concerns you. From June this year, the government has made it mandatory for such renters to deduct five per cent TDS (tax deducted at source) and deposit it with the income-tax department. Existing laws make it mandatory for a homebuyer to deduct one per cent TDS while carrying out the transaction. The new move will ensure people do not claim high house rent allowances using false documents. It will also pressure landlords to reveal their real rental income.
Let us understand it with an example. Suppose you pay a monthly rent of Rs 60,000, which amounts to an annual rent of Rs 7.20 lakh. At five per cent, you have to deduct Rs 36,000 as TDS and deposit it with the I-T department.
What should a tenant do?
- Under Section 194-IB of the I-T Act, you are liable to deduct TDS and deposit it with the department within a month's time. You have to file Form 26QC to do so.
- You can log on to the official website of the I-T Department, and pay the tax using your details and your landlord's PAN card details. In case your landlord does not have a PAN Card, 20 per cent TDS will have to be deducted.
- After filing Form 26QC, you have to generate Form 16C, the new form for taxes deducted on rental, and give it to your landlord within 15 days.
- In case you fail to deduct TDS, you will end up paying a monthly penalty of one per cent on the outstanding amount. In case you fail to deposit the tax with the IT department within time, you will be liable to pay a monthly penalty of 1.5 per cent on the outstanding amount.
What should a landlord do?
- As it is the responsibility of the tenant to deduct TDS, you, as a landlord, will have to disclose all rental income.
- *If case your tenant fails to deduct TDS, you cannot claim deductions, if any. This makes it important for you to ensure that your tenant does deduct TDS.
- If multiple people have rented one property and are paying Rs 50,000 or above as rent, they need not deduct TDA. It is only applicable on an individual tenant paying this amount. However, the names of all of these tenants must be mentioned in the rent agreement.
- In case there are multiple tenants who contribute to the monthly rent but the rent agreement mentions the name of one tenant alone, this person will be liable to deduct TDS.