My uncle gets pension from the defence sector and also earns salary from a second service. How should he show his income when filing income tax return (ITR)?

—Name withheld on request

Periodic pension is taxable for all employees. Hence, pension received from the defence sector is taxable as salary. For financial year (FY) 2018-19, where the taxpayer receives salary from more than one employer and does not have income from business profession, he is required to file the tax return using ITR-2.

Assuming your uncle does not have income from business profession, he shall be required to show the salary income in ITR-2 form under Schedule S. Details of both the employers such as name, address and tax deduction and collection account number (TAN) (mandatory only if tax is withheld) would need to be mentioned therein along with component-wise breakup of the salary.

Also, you will have to select “pensioners" as a category for the nature of employment in the salary schedule with respect to pension received from the defence sector. The tax return forms for FY20 will, however, be published subsequently (generally after the end of FY20) and the disclosure requirements specified therein would need to be complied with.

We are living on rent in Mumbai in a house jointly owned by an NRI couple and pay 52,000 as rent. Rent is currently being paid to one account but can be paid equally to two accounts. Is it mandatory to deduct TDS on rent paid to NRIs, irrespective of the amount of rent paid?

—Anand

The provisions of deduction of tax at source on payments made to NRIs are governed by Section 195 of the Income-tax Act, 1961. As per the said provisions, any person making payment to an NRI is obligated to deduct tax at the rates in force at the time of credit of such income to the individual. The said deduction is required to be made irrespective of the rental amount as no threshold has been prescribed in this regard. Hence, if the rent is paid to two individuals separately, tax deduction would need to be done on both payments, irrespective of the amount.

However, where it is considered that the rent paid by you (i.e. the tenant), does not constitute taxable income (either in full or part) in the hands of the payee or the landlord, either you or the landlord may make an application in the prescribed form and manner to Indian tax authorities, for a nil or lower tax deduction certificate under Section 195(2) and 195(3) read with Section 197 of the Act. Where such certificate is obtained, tax is required to be deducted at the rate prescribed in the certificate for the period specified in the certificate.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Queries and views at mintmoney@livemint.com

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