Photo: iStock
Photo: iStock

No need for TDS on rent if NRI’s India taxable income is less than 2.5 lakh

Assuming that your NRI son is the sole owner of the house property which is let out, the rental income from such house property will be taxable in the hands of your son

My son lives in the US. I have his power of attorney (PoA) and have been asked to collect the rent for my livelihood. Is TDS (tax deducted at source) required to be deducted from this? I am a senior citizen and the rent is less than 3 lakh per annum.

—Martin

Rental income from house property situated in India is taxable in the hands of the owner of the house property. The method of computing taxable rental income is prescribed under the income tax law as follows:

The gross annual value less municipal taxes gives the net annual value. Then, reduce standard deduction of 30% of the net annual value and interest on the housing loan from this, which will then be the taxable rental income. The gross annual value is the higher of the following: (a) The amount at which the property might reasonably be expected to be let out; or (b) The actual rent received or receivable.

In other words, the gross annual value compares the actual rent received or receivable with the expected rent of the property.

Also, any repayment of the principal amount against the housing loan taken from eligible lenders for acquisition of such property is eligible for deduction under Section 80C (maximum deduction under this section is 1.5 lakh) of the Income-tax Act.

Assuming that your son is the sole owner of the house property which is let out, the rental income from such house property will be taxable in the hands of your son.

In case of a “resident" landlord, the tenant is required to deduct TDS at the rate of 10% on rent paid to the landlord except where: (a) The tenant is an individual or HUF (Hindu Undivided Family) but not liable for tax audit under Section 44AB in the preceding financial year (FY); or (b) The rent paid or payable during the FY does not exceed 2.4 lakh per FY (till FY19, the limit was 1.8 lakh per FY).

However, even in the case of a tenant being an individual or HUF (not liable for tax audit under Section 44AB in the preceding FY), TDS at the rate of 5% is required to be deducted by the tenant where the rent amount exceeds 50,000 per month.

In case of a “non resident" (NRI) landlord, the tenant is required to deduct TDS at the rate of 30% (plus applicable surcharge and education cess) on rent paid to the landlord if the rental income is taxable in India.

Assuming that your son qualifies as an NRI for tax purposes, if his total taxable income (including this rental income) in India is below 2.5 lakh, there is arguably no requirement for the tenant to deduct TDS on the rental amount. However, the tenant is not likely to know the taxable income of your son and he may not have any choice but to deduct TDS unless you furnish the tenant a lower or nil TDS certificate obtained from the income tax officer.

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

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