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5 Percent TDS On House Rent Of Rs 50000 And Above Per Month

Mr. C.S. Sudheer | Posted On Thursday, February 02,2017, 08:34 PM

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5 Percent TDS On House Rent Of Rs 50000 And Above Per Month



Are you paying a house rent of INR 50,000 or more per month? Now you will have a new responsibility. The Finance Minister Arun Jaitley, has made a proposal, which will not allow you to make a false house rent allowance claim.  Citizens of our country love to evade taxes. The Finance Minister wants to bring more citizens under the tax net. This proposal might very well bring more citizens under the tax net.

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5% TDS on house rent of INR 50,000 and above per month

The Finance Minister says that if you are paying a monthly house rent of more than INR 50,000, you will have to deduct TDS (Tax Deducted at Source) of 5%.

"In order to widen the scope of tax deduction at source (TDS), it is proposed to insert a new section 194-IB in the Act to provide that Individuals or an HUF (other than those covered under 44AB of the Act), responsible for paying to a resident any income by way of rent exceeding INR 50,000 for a month or part of month during the previous year, shall deduct an amount equal to 5% of such income as income-tax thereon,” the Finance Ministry has said in memorandum to the Union Budget. The TDS will have to be deducted on the last month of the year in which rent is paid or last month of tenancy.  The amendment will come into effect on June 1, 2017.

From Government perspective, this amendment would ensure that there are no revenue leakages on account of such rental income. This will also discourage people who are claiming the HRA deduction fraudulently quoting the wrong PAN of the landlord. Quoting PAN of the landlord was mandatory in case the rent paid during the year was more than INR 1 lakh.

The Government has tried to ease the compliance burden by allowing such tenants to deduct tax only once in a previous year and doing away with the requirement of Tax Deduction Account Number (TAN). This move will primarily impact individuals or HUFs (other than those whose books of accounts are required to be audited). The tenant will need to ensure that this compliance is strictly followed within the prescribed time limits. Any delay or negligence in this regard may lead to interest / penal consequences.

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An example for better understanding

If you are living in a rented house and pay a rent of more than INR 50,000 a month, you will have to make a TDS of 5% when you pay your landlord. If your monthly rent is INR 60,000, you will deduct a TDS of 5% which is 5% of INR 60,000 (5% of INR 60,000) or INR 3000. You then pay INR 57,000 to your landlord. The deducted TDS amount of INR 3000 should be paid to Income Tax department on behalf of the landlord. Be Wise, Get Rich.


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