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Know the TDS rules if you are taking NRI’s house on rent

The department has given time till 27 October for stakeholders to give comments on the proposed amendment to Income Tax rule 17A and form 10A, the CBDT said. Photo: iStockPremium
The department has given time till 27 October for stakeholders to give comments on the proposed amendment to Income Tax rule 17A and form 10A, the CBDT said. Photo: iStock

  • If a payee qualifies as “Non-Resident” in India, the payer is required to deduct TDS at a specified rate (plus applicable surcharge and health and education cess) on taxable income of the payee.
  • it is the payer’s obligation to deduct and deposit TDS on the taxable income of the “Non-Resident”.

I have given the flat of my Non-Resident Indian (NRI) grandson on rent. The tenant had agreed to deduct TDS (tax deducted at source) at the applicable rate of 31.2%. But after taking possession of the house, he has denied deducting the TDS and deposit it in the government's account citing tedious procedure. I am a sick senior citizen lady and unable to take any legal action. Now, what can be done to avoid legal action by the Income Tax Department against my grandson?

Under India’s ncome-tax law, if the payee qualifies as “Non-Resident" in India during the relevant financial year, the payer is required to deduct TDS (tax deducted at source) at a specified rate (plus applicable surcharge and health and education cess) on taxable income of the payee. In case of rental income, the specified rate is 30% (plus applicable surcharge and health and education cess).

Accordingly, it is the payer’s obligation to deduct and deposit TDS on the taxable income of the “Non-Resident". In case of non-compliance, the payer will be liable for penal consequences.

As an income earner, your grandson may deposit the income-tax under advance tax mechanism or self-assessment mechanism. Advance tax needs to be deposited in four installments (15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March). In case of any default in payment of advance tax, interest at the rate of 1% per month is payable for the period of default of each installment. Self-assessment tax can be deposited on or before filing of income-tax return along with interest for delay in deposit of advance tax and self-assessment tax.

Sonu Iyer is tax partner and people advisory services leader, EY India. Queries at mintmoney@livemint.com

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