TDS on Rent Payment: How to Calculate and Deduct Tax on Rent Paid?

Blog

Admin 24 Apr 2024 1,588 Views

Knowledge Taxation

What is TDS?

The TDS concept was introduced to collect tax from the source of income itself. According to this idea, a person (the deductor) who must pay another person (the deductee) a specified payment type must withhold tax at source and remit it to the Central Government. The deductee from whose income tax was withheld at source would be entitled to receive credit for the amount withheld based on Form 26AS or a TDS certificate issued by the withholding agent.

TDS Rate Applicable on Rent

The person who must pay TDS on rent payment must deduct tax at source (i.e., not an individual or HUF). TDS on rent limit for FY 2022-23 is Rs. 2, 40,000.

An organization might pay Rs. 90,000 per month to rent an office, for instance. Since the annual rent exceeds the cap, after a 7.5% tax is deducted, each month, the owner receives a credit of Rs. 83,250. It is necessary to pay the government the remaining sum.

How is TDS on Rent Calculated?

The amount owed must be calculated to determine if a rent payment is subject to TDSon rent paid by the individual. The payee is required to figure out the TDS rate for rent and reduce the amount of the annual amount exceeding Rs. 2,40,000.

Akshar Enterprises, for example, makes monthly payments of Rs. 35,000 for equipment. They are increased to Rs. 4,20,000 per year in rent. The payee must therefore deduct Rs. 525 ($1.5%) or 1.5% TDS on rental income.

The payer is responsible for making TDS on rent deductions. If they don't, they must pay interest starting on the day the tax is deductible and continuing until the tax is deducted at a rate of 1% each month. The payer must pay interest at a rate of 1.5% per month from the day the tax is deducted until the day it is deposited if they reduce the TDS on the rent amount but fail to remit it to the government.

Related Information Repo Rate: How it will impact New Homebuyers

Points to be Remembered by the Landlords

Especially at first, being a landlord might be difficult. We will assist you in completing all the necessary landlord duties, including identifying and vetting potential tenants, drafting and adhering to a rental agreement, and electronically collecting rent.

The landlord may demand eviction of the tenant before the end of the lease period if the tenant fails to pay the rent value, or a portion thereof, within thirty (30) days following the landlord's notification for Payment (unless the parties agree otherwise);
Suppose a tenant must be evicted from a property because it is being demolished, rebuilt, or renovated. In that case, the tenant has priority to return to the home, provided the rent amount is fixed and specified in the tenancy agreement. For thirty (30) days following the landlord's notification, the tenant may benefit from this priority right;
If a tenant stays in a rental property until the end of the agreement's term without the landlord objecting, the agreement will be deemed extended for another similar duration or for one year (whichever is shorter) with the same terms and circumstances;
Neither the landlord nor the renter may cancel a valid contract unilaterally unless the parties have reached an agreement to do so or the termination is required by law;
Unless otherwise agreed, the value of the rent includes the use of any amenities on the property, including any pools, playgrounds, sports facilities, health clubs, and parking.

Related Information Important Common Land Measurement Units in India

How to make a TDS Payment?

Visit the NSDL website to start the e-filing process.
In the TDS/TCS area, choose "CHALLAN NO./ITNS 281". Your browser will take you to the e-payment page.
Enter the following information on this page.

● If you deducted TDS while paying a firm, choose "Company Deductees" under "Tax Applicable." Otherwise, choose "non-Company Deductees."

● Type in the assessment year and TAN for which the Payment is being made.

● Type the "Pin Code" and choose the "State" option from the drop-down menu.

● Decide whether to pay for TDS on rent deducted and paid by you or TDS assessed regularly.

● Select "Nature of Payment" and "Mode of Payment" from the drop-down menu.

● Push the "Submit" button.

After submission, a confirmation screen will appear. The confirmation screen will show the taxpayer's complete name as it appears in the master document if the TAN is valid.
After the data you entered has been confirmed, you will be taken to your bank's net banking website.
After logging in to the net banking website with the user's name and password provided by the bank, the taxpayer should proceed to complete the Payment.
When an electronic payment is made successfully, a challan counterfoil with the CIN, payment information, and bank name is presented. This counterfoil is evidence of the transaction's Payment. You must file your TDS return after making the TDS payment.

Related Information What is Gift Deed and How Can we use other facts

TDS on Rent Paid to NRIs

According to section 195 of the IT Act, the payer must deduct TDS at a rate of 30% of the rent paid when an NRI receives rent for a property in India. The jurisdictional official may receive a formal request for a lesser TDS deduction from the NRI paying the rent.

Is TAN Mandatory for TDS?

Every person who withholds or collects tax at source must apply for the allocation of a TAN under section 203A of the Income-tax Act of 1961. Additionally, TDS/TCS returns (including any electronic TDS/TCS returns), TDS/TCS payment challans, TDS/TCS certificates, and other papers as may be prescribed must all contain the TAN. According to section 272BB, there is a Rs. 10,000 fine for failing to apply for a TAN or failing to include the TAN in the required paperwork.

Form for TDS Payment

The Challan ITNS 281. The taxpayer must submit TDS on house rent and TCS before issuing Challan ITNS 281. As a result, it must adhere to the deadlines established for withholding and remitting tax.

Related Information How to Check Property Ownership Details Online in India

FAQ

Q. Where can I pay TDS on rent?

Property Rent TDS rate - eTax Payment Right Away (via Net-Banking/Debit Card Facility), Property Rent TDS rate - e-tax Payment Due on Later Date (through Bank branches).

Q. What is the meaning of 'rent' for TDS on rent?

Rent is any payment made under a lease, sublease, tenancy, or another arrangement for the use of (individually or collectively) any of the following:

● land,

● a structure (including one used as a factory),

● property adjacent to a building (including one used as a factory),

● machinery,

● plant,

● equipment,

● furniture, or

● fixtures

Related Information How to compute Gross Income?

Q. What are the income tax forms for TDS on rent?

To include the high rental income groups within the scope of taxation, the Government of India has added a new Section 194IB to the Income Tax Act. TDS must now be withheld from any individual or HUF payments of rent totaling Rs. 50,000 or more.

Q. What is the penalty for not deducting TDS on rent?

Loss of rights if TDS is not deducted. Tenants who pay rent above the threshold limit must exercise extra caution when filling out TDS forms. If TDS is deducted late, a penalty is assessed at a rate of 1% simple interest per month until TDS is finally deducted and paid to the government.

Related Information All You Need To About Khasra Number

About Author

Jatin Dubey

An enthusiastic content writer who is a law graduate and has been working as Real Estate Consultant for around 9 years.
He has worked with top Real Estate Agencies and Builders in Delhi, Bangalore and Pune. His skills to perform market analysis and explore high potential localities has helped many clients in the past.

TDS on Rent Payment: How to Calculate and Deduct Tax on Rent Paid?