Tax Deducted at Source (TDS) is a way for the Indian government to ensure that people and businesses pay their taxes from your income.

TDS applies to many different kinds of income, such as rent that a person or an organization gets. In this blog post, we'll talk in depth about TDS on rent and provide a full guide to understand the rules, laws, and processes.

How to Pay TDS on Rent of Property?

Follow these steps to pay TDS on rent:

Check if TDS applies: If the rent paid or due to a person or Hindu Undivided Family (HUF) is more than Rs. 2.4 lakhs in a financial year, TDS must be taken out.

**Calculate TDS: **The TDS on rent for land, buildings, tools, furniture, and other things is 10%. If the rent is paid by an individual or HUF whose income does not exceed the limits in Section 194-I, the TDS rate is 5% (as long as the rent paid each month is more than Rs. 50,000).

Deduct TDS: The person who pays the rent is responsible for reducing TDS and sending it to the government on behalf of the landlord.

File TDS return: You need to choose the right form depending on the type of TDS payment. Companies and people who send money to NRIs must file TDS returns every three months. The person should have a PAN to remove TDS from the rent.

When is TDS Deducted on Rent?

In India, rent is subject to TDS. Here's what you need to know about TDS on rent:

• TDS is taken out when a renter pays an owner more than 2,40,000 in rent annually.
• The renter has to take out a certain amount of tax from the rent they pay to the owner and send it to the Income Tax Department.
• TDS is calculated based on the total rent paid, not each month's rent.
• The TDS amount taken by the tenant must be sent to the government within the time limit to avoid fines and interest charges.
• TDS on rent is a way to make sure landlords pay taxes on their rental income and stop tax evasion.
• Tenants should know what the TDS rules are about rent and do what they need to do to stay out of legal trouble.

What if TDS on Rent is not Deducted?

TDS is a way for the Indian government to receive taxes from income through rent. When renters pay their owner's rent, the TDS on rent rule applies.

According to the rules, if a renter pays an owner more than 2,40,000 rent yearly, TDS must be removed at the correct rates.

If TDS is not taken from rent, there could be consequences, such as 1% interest for each month or part of a month from the date TDS could have been deducted until it was deducted.

It's important to remember that the TDS that the renter takes out must be sent to the government within the time limit.

If it's not paid

Some people who have to pay TDS on their rent don't pay their taxes on time or claim them. From the month that TDS on rent was applied to the month it is being taken, they will have to pay 1% per month in interest.

If it gets Deducted but not paid

If the person took out TDS on rent but didn't pay it to the government on time, they will have to pay 1.5% interest per month from the month TDS was taken out until the month it is paid.

TDS on Rent Paid by NRIs

Non-resident Indian (NRI) owners are subject to higher TDS under Section 195 of the Indian Income Tax Act. The renter must pay the owner, who lives outside of India but has a property in India, the TDS withholding rate of 30%.

The Income Tax Department of India gives you a 10-digit alphanumeric account number called a Tax Deduction Account Number (TAN). The taxpayer needs a TAN in order to pay TDS on rent to non-resident Indian owners. People who are in charge of taking the tax amount out of the source can get the account number.

If the person doesn't pay the TDS on time, they'll have to pay the fines that apply based on the most important law.

TDS Effect on Owner & Tenants

Depending on the situation, the TDS affects both owners and renters differently. Here are some important things to think about:

To the owner:

When a renter moves out and a new one moves in, the owner or landlord is responsible for ensuring the new lease goes smoothly. They may also need to ensure that the rent they get from renting out or subletting the property is subject to TDS. Owners should be familiar with the terms of service provided by TDS and understand their rights and responsibilities as outlined in the agreement.

For tenants:

Tenants should be aware of TDS for installation or maintenance and cooperate with TDS representatives if they have the power to give access. If tenants are not the property owners, they may need to give TDS the owner's permission.

Conclusion

Make sure you pay your TDS on rent on time to avoid paying extra interest and fees for being late. Before you pay the TDS on rent, you should carefully figure out how much tax you owe and check the numbers on a government website. Remember that TDS does not apply to the amount, like ground rent or city taxes.