How does the TDS provision apply to rent paid?

Tax deductions are made at the origin of trades in order to prevent tax sidestepping or situations that could contribute to the evasion of tax filings on rent payments, according to Income Tax Laws.

As a result, the individual who pays the rent often deducts the tax on behalf of the state. TDS is the abbreviation for this deduction (Tax Deduction at Source).

What exactly is TDS?

TDS, or tax deduction at origin, is a sort of taxable income which is taken by the individual payment on the purchase (often the buyer in real-estate transactions) while making specific high-end transactions. The individual who receives the money from another person is the one who is taxed. The individual who takes a cut TDS deposits the equivalent amount into the central government’s account.

TDS is collected on a variety of sources of income, including the rent paid to the landlord by the tenant. In addition, several types of TDS rates apply to different sorts of income.

TDS rate applicable on rent

The rent payer (not an individual or a HUF) is required to deduct a 10% TDS on any property or land under Section 194-I of the Income-tax Act. If the rent paid per year exceeds Rs 2.4 lakhs, this TDS is payable. Individuals and HUFs must deduct 5% TDS on rent if the monthly sum exceeds Rs 50,000.

While a property owner rents out one or more properties to the same rent payer, and the total rent for both properties exceeds Rs 2.4 lakhs, the rent payer must deduct a TDS of 10% when paying the rent to the landlord.

Landlords should keep the following points in mind
  • Provide your PAN number to the tenant so that he can report the rent and deduction to the IRS.
  • Always double-check the tenant’s tax deductions on your form 26AS Annual Tax Statement.
  • Request a copy of the form 16C from the renter, which can be found on a legitimate website.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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