TDS Of 5% Introduced On High-Value Rents

The Union Budget 2017 has introduced tax deduction at source (TDS) on high-value rents. A TDS of 5% will be applicable on those people who are paying a home rent which is above Rs. 50,000 per month.

Section 194-I of income tax act laid provisions for TDS, if the rent paid or credited in the account of homeowner was more than Rs.1.80 lakhs per annum. This was limited to some cases but now it has been broadened to inculcate more individuals.

Rent is basically a payment made for the use of building or land (or maybe both) under various kinds of agreements like tenancy, sub-lease, lease or any other arrangement whichever is suitable to both the parties. The amount of deduction in tax by the tenant can be deposited once a year. This will be applicable for the complete financial year. On 1st June 2017, this provision will come into effect.

The tax deducted is applicable in two ways –

• It can be deducted in the last month of the tax year when the rent is to be credited.
• It can be deducted in the last month of tenancy.

However, the tenant who is deducting the tax does not need to obtain a tax deduction account number (TAN). The deposition of the TDS has to be done within the given time period, by the tenant. If the tenant is unable to deposit TDS in the government account in the time frame, that is, the payment gets delayed, he shall be liable to a penalty. Property owners who are still without a PAN will compulsorily have to get one now. Apart from this, if they want to claim credit of tax refrained at the tenant’s end, they have to file their return of income.