TDS Mandatory if Rent Exceeds Fifty Thousand
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TDS Mandatory if Rent Exceeds Fifty Thousand

TDS mandatory if rent exceeds 50K

The government made a very important announcement for people living in metropolitan cities. Now those staying in rented accommodation paying more than Rs. 50,000 per month as rent are required to deduct tax on behalf of their landlord. The government has taken this step to widen its tax net. However, this has increased the tax compliance burden on the rent payers.

It has proposed to introduce a new section, 194-IB in the Income Tax Act to provide that an individual or an HUF (other than those covered under 44AB of the Act), responsible for paying rent to a resident exceeding Rs. 50,000 for a month or part of a month during the previous year, shall deduct an amount equal to 5% of such payment as income-tax thereon. The following amendment will take effect from the date budget gets the final approval from the President of India

Further, a proposal has been made in the Act that tax shall be deducted on such payment at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. It  is  also  proposed  to  provide  that  tax so deducted  shall  be deposited  only  once  in  a  financial year  through  a  challan-cum-statement to be notified soon.

However, there is one relief for you. To reduce the compliance burden on rent payers, the government has proposed that the deductor shall not be required to obtain tax deduction account number (TAN) as per section 203A of the Act and the deductor shall be liable to deduct tax only once in a financial year.

It is also proposed to provide that where the tax is required to be deducted @ 20% in case where landlord does not provide his PAN, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, depending on the situation.

Penalty for non-compliance

Non-compliance with the TDS provisions like failing to file TDS return on time or not deducting the right amount of tax can cause problems for you.

  • Implication of Non Deduction: Interest @ 1 % p.m. of such tax from the date on which such tax was deductible till the date on which such tax is deducted.
  • Implication of Non Payment: Interest @ 1.5% p.m. of such tax from the date on which such tax was deducted till the date on which such tax is actually paid.
  • Fees for Late Filing of TDS return: Under section 234E, a fee of ₹ 200 per day would be levied for late furnishing of TDS statement from the due date of furnishing of TDS statement to the date of furnishing of TDS statement, maximum up to amount of tax deductible.
  • Penalty for failure to furnish TDS Return: The penalty can be charged between Rs. 10,000 and Rs. 1 lakh.

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Niteesh Singh
Niteesh Singh
Niteesh works as a Tax Researcher at H&R Block India. He makes taxes easy to understand for people. He creates content for the website, marketing activities and social media. He carries experience in creating a wide variety of content like blogs, press releases, research papers, etc.

1 Comment

  1. saurabh says:

    I came to know about this obligation after seeing the advertisements put by Income Tax department in the newspapers. But by that time I had already paid my rent for the month of march. So when I approached my landlord , he told me that I can not deduct and issue the TDS certificate as he has already shown the rent as his income and paid advance tax on that income. Now what does the law says for this situation? Am I liable for my mistake of not deducting on time ? The landlord has shown the income and paid the tax and there is no loss of revenue to the government, what should i do?

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