CUT BACK - TDS on high-value rent
The Union Budget (2017-18) introduced tax deduction at source (TDS) on rent paid in some cases.
The TDS has been introduced on high-value rent. For those paying a home rent above Rs 50,000 per month, a 5% TDS will now be applicable.
The existing provisions of Section 194-I of the Income Tax Act, among other things, provides for TDS at the time of credit or payment of rent to the account of a homeowner, beyond Rs 1.80 lakh per annum. It was applicable only in some cases. Now, the scope has been widened to include all individuals.
Rent means payment under lease, sub-lease, tenancy, or any other agreement or arrangement for the use of land, building, or both. The tax deducted by a tenant can be deposited once a year, for the full financial year. This provision will come into effect from June 1, 2017.
The tax can be deducted at the time of credit of rent for the last month of the tax year or last month of tenancy, as applicable.
The tenant deducting the tax is not required to obtain a tax deduction account number (TAN). A tenant has to deposit the TDS with the income tax department within the specified time frame. A delay or failure to remit TDS to the government account will entail a penalty. Property owners who don't have a PAN will have to obtain one now. Also, they will have to file their return of income to claim credit of tax withheld at source by the tenant.