In a move aimed at simplifying tax compliance and providing relief to taxpayers, the government has increased the threshold for Tax Deducted at Source (TDS) on rent. This change is particularly beneficial for tenants and landlords, reducing the compliance burden and making the process more straightforward. Here’s everything you need to know about the new TDS on rent rules.
What is TDS on Rent?
TDS on rent is a provision under Section 194-I of the Income Tax Act, which requires tenants to deduct tax at source when paying rent to a landlord if the annual rent exceeds a specified threshold. The deducted tax must then be deposited with the government.
Key Changes in TDS on Rent:
- Increased Threshold Limit:
- Before Amendment: TDS on rent was applicable if the annual rent exceeded ₹2.40 lakh.
- After Amendment: The threshold has been increased to ₹6 lakh. This means that if the annual rent is below ₹6 lakh, tenants are not required to deduct TDS.
- TDS Rate:
- The TDS rate on rent remains at 10% for rent payments above the new threshold of ₹6 lakh.
- Simplified Compliance:
- TAN Requirement Relaxed: Individuals and HUFs (Hindu Undivided Families) who are not liable for a tax audit can now use their PAN (Permanent Account Number) instead of obtaining a TAN (Tax Deduction and Collection Account Number) for deducting TDS on rent.
Benefits of the New TDS on Rent Rules:
- Reduced Compliance Burden: With the increased threshold, fewer tenants will need to deduct TDS, reducing the compliance burden.
- Ease of Process: The relaxation in TAN requirements simplifies the process for individuals and HUFs, making it easier to comply with TDS regulations.
- Relief for Small Rent Agreements: Tenants and landlords involved in smaller rent agreements (below ₹6 lakh annually) will no longer need to worry about TDS deductions.
How to Comply with TDS on Rent:
- Deduction: If the annual rent exceeds ₹6 lakh, the tenant must deduct TDS at the rate of 10% at the time of rent payment.
- Deposit: The deducted TDS must be deposited with the government within the specified time frame.
- Form 26QC: Tenants must file Form 26QC, which is a challan-cum-statement for TDS on rent.
- TDS Certificate: After deducting TDS, tenants must provide the landlord with a TDS certificate (Form 16C).
Conclusion:
The increase in the TDS on rent threshold to ₹6 lakh is a welcome change that simplifies tax compliance for tenants and landlords. By reducing the compliance burden and easing the process, this amendment provides significant relief, especially for smaller rent agreements. Whether you are a tenant or a landlord, understanding these changes can help you navigate the TDS on rent requirements more effectively.
