Rationalize TDS on Rent payment

The current rule stipulates that annual rent paid in excess of Rs.180,000/- per annum calls for TDS to be deducted by the payer. It is creating anomalies.

Currently, the Income Tax Act stipulates that annual rent paid in excess of Rs.180,000 requires the payer of rent to deduct TDS and deposit the same with the government of India. While this is a laudable measure, the limits and the methodology require a re-look. An annual rent of Rs.180,000/- translates into a monthly rent of Rs.15,000/-. This is unrealistic for most metros. This limit requires to be modified to at least Rs.500,000/- to make it more meaningful.

There are other related issues in this subject. Firstly, TDS calls for a good deal of paper work on behalf of the deductor, who is required to deposit the same with the government of India as well as maintain records and furnish proof to the payee. The payee on the other hand, is required to claim the deduction of TDS on rent while filing his return and claim credit against his actual tax payable. This necessitates a lot of paper work for both the payee and the payer.

There are more problems. Deducting TDS on rent also calls for the landlord also to submit his PAN details. Most landlords are unwilling to do the same. This compels many rental contracts to include a cash component, so as to ensure that the official rent paid is within the TDS limit only. It also forces many landlords and tenants to rely on an informal gentleman’s agreement to avoid registering the contract. This puts the rights of the landlord and the tenant at risk and creates scope for legal hassles later on. A more rational approach of raising the TDS limit to around Rs.500,000/- rent per annum will be more meaningful and avoid the concomitant problems.

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