TDS On Rent - All Important Aspects.

 

Out of all the cities that you live in, there's one in particular that embodies everything, be it mystery, celebrity culture, pricey properties, serene gardens, the west coast of the Arabian Sea, scrumptious food centers, etc. You guessed it right—it's our city of dreams—Mumbai. Finding a rental house in Mumbai can be a bit problematic and difficult, but with the right help and the right resources, you are all set. Let's delve deeper into taxes today. Yes, taxes are important; we learn about them, we pay them, and most of the time we dislike the arduousness of it all!

Let's understand today: What is TDS? Tax deducted at source is a provision that you, as a tenant, will deduct from the total rent amount and pay to the income tax authorities in your local region, thereby also providing a copy of the TDS certificate to your landlord. Why do we deduct TDS? What's the margin amount at which you will deduct TDS? How will your rental house in Mumbai be impacted by it all? Let's delve a bit deeper and comprehend what's so important about this term!

1. Applicability for TDS: You are only supposed to pay TDS on your rent amount if the total rent per annum is 2,41,000. So for example if you have a rent of 50,000 per month which clearly accumulates to 6,00,000 for the entire year you will deduct the TDS from your rent amount & make payments to the concerned income tax professional, only if it crosses the aforementioned threshold.

2. Rate of TDS Levied : The amount of TDS that should be deducted from the total rent amount is equally important when discussing TDS as a concept. The rate of TDS stands at 5% on the monthly rent amount, so for example, if you pay an amount of 40,000 each month, a TDS of 5% will be deducted for the same. But, while deducting the TDS, it's important that the landlord discloses their PAN details. If they don't, the TDS levied will be much greater, up to 20%.

3. Timely Payment of TDS : In the above headers, we already underlined how important it is to file for TDS. It is not the landlord's responsibility to file for TDS; therefore, the tenant should make sure that they file the TDS on time without any delay; any postponement may lead to an increase in interest rates or penalties under the Income Tax Act.

4. TAN Number : The NSDL website allots TAN to every candidate who is responsible for collecting and deducting TDS. The TAN (tax deduction and collection account number) is a 10 digit alphanumeric number allotted to every customer who wants to deduct TDS, in this case, the tenant.

5. TDS Deposit: The TDS deducted on rent should be deposited with the government using Form 26QC  within 30 days from the end of the month in which it was deducted. For example, if TDS was deducted on July 15, the deposit should be made by August 30. Form 26QC is a statement-cum-challan for TDS on rent payments. It needs to be filled out and submitted online through the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal. The form captures details such as the landlord's and tenant's PAN, property details, rent amount, TDS amount, and other relevant information.

6. Multiple Property Owners: If the property has multiple owners, the TDS Deduction for the same will also vary because the TDS deduction will be split according to the share of each and every member of this property. The Tax will be depreciated in accordance with the share of each partner.

7. Deduction Under TDS: The deductions under TDS also follow stringent rules because they are under the purview of the Income Tax Department. The TDS Amount paid should not exceed the rent amount paid for the very last month of the financial year, i.e., if the rental agreement ends in April after completing the span of 11 months, then the TDS deducted shouldn't exceed the rent amount for April.

8. Non Resident Landlords : If the landlord is a non resident or a NRI, different rules are applicable to him or her. Will there be variations in the rate of TDS deducted and collected? ABSOLUTELY. The TDS deduction stands at 30 % on the monthly rent amount, or as per the applicable tax treaty signed between India and the resident country of the landlord.

9. Multiple Tenants : Multiple Tenants can also create disruption in the standard procedure of filing your TDS. Well, if you live with one or six of your flatmates, the TDS is deducted in accordance with their respective shares of the rent. For example, if you have three roommates, and the rent is deducted in  20-20-60 then the TDS decisions will also be structured in this specific way.

10. Impact of GST: GST may be applicable to the rent amount depending on the rental agreement between the tenant and the landlord's GST registration status. Even if GST is levied on the monthly amount paid for rent, the TDS would be deducted by including the GST component of it.