The provisions of TDS on Rent, state that, if amount of rentals paid during a financial year exceed Rs. 1,80,000/-, then the lessee is required to deduct TDS while paying Rent to the owner of the asset. The rate of TDS is 10% for Land, Building or Furniture whereas 2% for Plant & Machinery U/s. 194-I of Income Tax Act, 2016.
However in many cases the total Income of receiver including such Rental income was below the basic exemption limit and hence no tax was payable the total income. In such cases, the receiver was required to file his Income-tax Return to claim the Refund of TDS. To overcome this difficulty, section 194-I has been amended in the Budget 2016. It is proposed that if the Tax payable on Total income of receiver is NIL then he is required to give a Self-declaration to the lessee in the Form 15G/H. If receiver submits such Form then lessee is not required to deduct TDS on rent even if amount of rent is more than Rs. 1,80,000/-.
This amendment is a big relief to nil taxpayers who receive rent more than given limit but Tax payable on their Total Income is NIL.
Eg. Mr. Arjun (age 45 years) let his house property on rent to Mr. Krishna for Rs. 20,000/- per month. He does not have any other income besides house rentals. State whether Mr. Krishna is required to deduct TDS or not. Also state whether any remedy available to Mr. Arjun from TDS.
As per section 194-I of Income Tax Act, TDS is required to be deducted if total rent paid during financial year is more than Rs. 1,80,000/-. In present case, total rent paid during a financial year amounts to Rs. 2,40,000/- (Rs. 20,000*12), hence Mr. Krishna will deduct TDS at 10% every month while paying rentals.
However total income of Mr. Arjun (including rent) is less than basic exemption limit of Rs. 2,50,000/-, hence no tax is payable by him. In such case, as per amendments from F.Y. 2016-17, Mr. Arjun may provide a self-declaration (Form 15G/H) to Mr. Krishna not to deduct TDS.