Applicability of TDS Provision on Rent Payment of a Residential / Commercial Property to Residents and Non-Residents
Indian tax law mandates Tax Deducted at Source (TDS) on rent payments. Businesses and tax-audited individuals/HUFs must deduct 10% TDS if monthly rent to a resident landlord exceeds ₹50,000, requiring a TAN and monthly TDS deposits. Non-tax-audited individuals/HUFs deduct 2% TDS on rent exceeding ₹50,000 per month, paid at year-end or vacancy, without needing a TAN. Rent payments to non-resident landlords attract 31.2% TDS (including cess and surcharge), irrespective of the amount, necessitating a TAN, monthly deposits, and Forms 15CA/15CB filing. These rules cover both residential and commercial properties, with varying compliance requirements based on the payer and payee status.
1. Rent payment of Property to Resident Landlords by Business Entities
As per Section 194I, any business entity including Partnership Firm, Company, Individuals/HUFs (who are subjected to Tax Audit) are required to deduct TDS, if Rent payment of Property to a Resident Landlord for a month or part of a month exceeds Rs.50,000/- @ 10%. It covers both Residential as well as Commercial Property. The TDS is required to be cut at the time of payment or credit, whichever is earlier. The payer is required to obtain TDS Account No. (TAN) and required to pay TDS on a monthly basis before 7th of each month and file Quarterly Statement of TDS.
2. Rent Payment to Resident Landlords by Individuals and HUFs not subject to Tax Audit
As per Section 194IB, an Individual/HUF (who are not subjected to Tax Audit) and paying Rent to a Resident Landlord towards use of a Property, even for their personal use; are required to deduct TDS, if Rent payment for a month or part of a month exceeds Rs.50,000/-. The rate of TDS has been reduced from 5% to 2% with effect from 1st October 2024. It covers both Residential as well as Commercial Property. The TDS is required to be cut at the end of the Financial Year or at the time of vacating the property during the year, whichever is earlier. The payer is not required to obtain TDS Account No. (TAN) and TDS can be deposited using PAN of the payer.
3. Rent Payment to Non-Resident Landlords by any Person or Business Entity:
As per Section 195, in respect of Rent payment to a Non-Resident Landlord by any person or any business entity requires TDS deduction @ 30% plus applicable Cess and Surcharge, depending upon the total amount and depending upon the type of Recepient. Even an Individual taking a residential property for his personal use is required to deduct TDS from payment of Rent to a NRI Landlord. There is no minimum threshold prescribed for Rent payment to NRI and any amount will involve deduction of tax. The payer is required to obtain TAN and file quarterly returns in addition to depositing TDS on a monthly basis. Additionally, the payer is also required to File Form 15CA/15CB, since Rule 37BB does not make any exception in this regard and any amount paid to NRI which is in chargeable to Income Tax is subjected to TDS.
The above provisions are summarized in the following table:
| Sr.No. | Payer Type | Threshold Limit above which TDS is applicable | Receiver Resident / Non-Resident | TDS Rate | TDS No.(TAN) Required | Frequency of Depositing TDS | Additional Compliance |
| 1 | Companies/Firms/ Audited Individuals or HUFs | Rs.50,000 per month or part of the month | Resident | 10% | Yes | Monthly | Filing of Quarterly TDS Return and Issuance of TDS Certificate |
| 2 | Individuals/HUFs (Not Audited) | Rs.50,000 per month or part of the month | Resident | 2% | No | End of the FY or before vacting the property | Issuance of TDS Certificate |
| 3 | Any Person | Any Amount | Non Resident | *31.2% | Yes | Monthly | Filing of Form 15CA-15CB in addition to Filing of Quarterly TDS Return and Issuance of TDS Certificate |
In case of payment of Rent to Non Residents, Basic Tax Rate of 30% shall further be increased by the applicable cess and surcharge depending upon the total amount of Rent payment in a year and the type of the Recipient
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