If your landlord happens to be a Non-Resident Indian (NRI) then you have to fulfil more obligations than regularly paying rent to your landlord who is primarily based abroad. If Indian income tax laws are anything to go by, if any individual or a company is giving rent to an NRI then they must levy taxes at source (TDS) prior to making the payment.
There are provisions under Section 195 of the Income-tax Act, 1961 that specify the same as well. It mentions that anyone who is required to pay an NRI interest or any other sum (not being income chargeable under the head “Salaries”) shall, during the crediting of such income or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.
So, today we will go through the things that tenants should be aware of while paying rent to NRI landlords.
The Amount From Which Taxes Have To be Levied
As per the income tax rules, a tenant has to subtract the tax from the rent payable. The tax has to be deducted notwithstanding the amount of rent. This implies that it does not matter whether you are paying Rs 20,000 or Rs 70,000 as monthly rent, tax needs to be deducted prior to making the rent payment.
What’s The Rate Of TDS?
The income tax law mandates that TDS has to be charged by the tenant at the prevailing rates or the present tax rates declared in the yearly budget. Right now, the tax rate pertaining to TDS on rental income from house property in India happens to be 30%. The tax rate has to be raised with applicable surcharge and cess based on the amount of rent payable. The rate ceiling happens to be 42.744 percent.
Is There Scope To Deduct Tax At A Lower Rate?
It is to be noted that as per Income-tax Act both tenants and landlords are within their rights to apply for lowering TDS. If the tenant feels that the whole rent or part of the income may not be subject to tax in the hands of the NRI landlord, he or she should apply in a relevant form and manner to their Assessing Officer (AO) to get to know the real taxable income. The tax deductions can happen only on that part of the income. Likewise, the NRI landlord can also apply in the prescribed form to his AO for getting a certificate that permits him to get rental income sans tax deduction or at a lower rate of tax.
