Can NRIs pay advance tax on rental income?

2 min read 22 Jan 2023, 10:02 PM IST Parizad Sirwalla

As per the provisions of section 195 of the Income Tax Act, the tenant, being the person responsible for payment of rental income, is required to deduct taxes at the prescribed rates and deposit with the tax authorities on monthly basis.

My daughter is a non-resident Indian and has a nominal rental income here. Neither she nor her tenant can afford to hire a CA for tax deducted at source (TDS) on this income and remit it to the income tax (I-T) department. Can she deposit the TDS on rent directly to the department as advance tax?

—Dolly Moga

As per the provisions of section 195 of the Income Tax Act, the tenant, being the person responsible for payment of rental income, is required to deduct taxes at the prescribed rates and deposit with the tax authorities on monthly basis. Further, the tenant is also required to obtain a Tax Deduction Account Number (TAN) and file the quarterly withholding tax returns in respect of such taxes so withheld and deposited.

If neither your daughter nor the tenant is in a position to ensure compliance with the above provisions, the following options may be explored:

a. In case your daughter believes that basis her level of income (including the rental income) and other factors it justifies no deduction of tax from such rental income, then your daughter may approach the tax authorities for obtaining a certificate of ‘Nil’ deduction of income tax. If and once obtained, the deductor of tax (being the tenant in this case) will not be required to withhold taxes on the rental payments. Else, the tenant would be required to deduct taxes at the applicable rate or such reduced rates, as approved by the tax authorities. Non-compliance with these provisions may render the tenant as assessee in default and consequent interest and penal provisions would be applicable.

b. If your daughter files her annual ITR, offers such rental income to tax in the return, deposits the necessary taxes by way of advance / self-assessment tax and a certificate is obtained by the tenant from a CA in the specified form, then such tenant may not be considered as assessee in default and penalties may not be imposed, subject to evaluation by the authorities. However, interest on non-withholding may still be payable to a specified extent.

I have worked in the garments industry (a proprietorship firm) for 4 years, 7 months and 7 days. The company terminated my employment without reason after the first week of November. Currently, less than 10 employees are working at the firm. How can I claim gratuity from the company?

—Name withheld on request

It is to be noted that the provisions of The Payment of Gratuity Act, 1972 is generally applicable to any shop or establishment, in which 10 or more persons are employed (except in case of factory and establishments in specified sectors where there is no threshold for the number of employees). Further, once the provisions become applicable, the same shall continue to remain applicable even if the number of employees fall below 10.

Based on the information provided by you, it is not clear whether the provisions of the Gratuity Act, 1972, is mandatorily applicable to your company and this is required to be further evaluated based on additional details.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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