Here’s how to deduct TDS on Rent over Rs 50,000 per month

As per recently announced Budget 2017, individuals and HUF who pay rent of Rs 50,000 or above will have to deduct TDS at the rate of 5%.

This change will be effective  01.06.2017.

Up till 31st May 2017,  only those individual/HUF have to deduct TDS @ 10% if Tax Audit is applicable to them.

[Who should get a tax audit done, see here].

[See old TDS rule here].

Effective 1st June 2017, all individuals and HUF have to deduct TDS @ 5% if they are paying rent of Rs 50,000 or more per month.

This change is basically done to ensure that people having large rental income must report their rental income in their income tax returns. These landlords can take credit of TDS against their total tax due while filing tax returns.

Various relaxations has been given so as to ease the process of TDS such as

No requirement of TAN Number

Individual/HUF (other than those who need to get a tax audit done) need not get a TAN number to deduct TDS. TAN number is basically the Tax deduction and collection account number that is mandatory if one has to deduct TDS under the income tax act. This requirement has been relaxed.


TDS to be deducted once in a financial year

To further simplify the process of TDS, it can be deducted only once in the financial year.

TDS can either be deducted

at the time of credit of the rent to the account of the payee (landlord) for the last month of the financial year OR

the last month of the tenancy if the property is vacated during the year OR

at the time of payment whichever is earlier.

For example Rahul is paying a rent of Rs 52,000 per month. Now as per the changes in budget 2017, he will pay Rs 52,000/month but while making the payment of the rent for March, 2018, he is required to deduct TDS @ 5% on the total rent paid for the year F.Y 2017-18. TDS works out to 5%(Rs 52,000 x10) or Rs 26,000, since the new rule is applicable from 1st June 2018 i.e. 10 months. In the last month, Rahul can pay the landlord Rs 52,000-26,000 = Rs 26,000. He has to then deposit Rs 26,000 with the income tax department. He will have to furnish the PAN of the landlord.


And suppose he vacates the house in Dec 2017, then he is required to deduct TDS@5% while making the payment of rent for Dec, 2017


Meaning of Rent

Rent for the above purpose means any payment made under any lease, sub-lease, tenancy or any agreement for the use of land or building or both.


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