Taking rent? Know about TDS?

Kirti Kadam

TDS is levied on various types of income like salary, interest earned on bank deposits, commissions, house rent and dividends received above a certain limit. However, the rate of TDS deduction varies as prescribed.

It is important to follow the prescribed rules regarding deduction of TDS and filing of TDS returns as failure to do so will result in fines and in some serious cases imprisonment.

The rate of TDS depends on the nature and amount of income, as well as the status of the recipient (whether resident, non-resident, etc.). In some serious cases, as mentioned under Section 276 etc of the Income Tax Act, 1961, if there is willful negligence in deducting or depositing TDS, they can face prosecution and imprisonment for up to seven years. This legal action can have serious consequences.

If the payment is subject to TDS, the person making the payment must deduct a certain percentage of the amount paid as TDS. The recipient is bound to get a TDS certificate from the deductor within the prescribed time and this certificate mentions the amount deducted as TDS. For example, in cases of house rent where the rent is Rs 50,000 or more per month, the landlord has to remit the same to the government within 30 days of the end of the month in which the TDS is deducted, by paying the invoice in Form 26 QC. Late filing of Form 26 QC will incur a late fee of Rs 200 per day. The tenant is liable to furnish the TDS certificate to the landlord within 15 days of filing the return. After obtaining this certificate the home owner can claim the amount related to the deduction. TDS is deducted in the last month of the year. In some cases, if the rental agreement ends within a year, TDS may be required to be deducted in the last month of the agreement. Often the rental agreement is divided into two financial years instead of ending in a single financial year. In such a case, TDS must be deducted for the first time in the last month of the financial year i.e. March. Thereafter TDS has to be deducted in the month in which the rental agreement ends in the second financial year.

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