Applicability of TDS from Rents and method of calculation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 March 2011 Dear Sir

I would like to have clarification to the following example:

Example:

1) Agreement effective February 2011
2) Landlord and Payee Senior Citizen, single and resident Indian
3) Let out to Company for occupation of specific employee for residential purposes.
4) Monthly Rent inclusive of amenities: Rs.20,000/-
5) Lease period 11 months with auto renewal for further 11 months
6) At the end of 22 months a fresh Agreement is entered into.
7) Total payment for FY 2010 - 11 Rs.40,00/-
8) Total payment for FY 2011 - 12 Rs. 200000/-

Query

1) Since payment during AY 2011-12 is less than Rs. 180000/- is TDS applicable? Yes/No
2) For AY 2012-13 the total payment is again less than Rs.180,000/- is TDS applicable? Yes/No
3) If the total rent payable under the agreement for 11 months is to be taken into account
whether the TDS will be applied on

a) 240000 - 180000 = 60,000/- or
b) 240000/-

CA KRISHNA KUMAR DARUKA

CA KRISHNA KUMAR DARUKA (Expert)
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08 March 2011 For AY 11-12 total rent will be 40000 hence no TDS.

For Asst Yr 12-13 total rent will be 240000 hence TDS to be deducted on rent every month @ 10%.

srinivasan

srinivasan (Expert)
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08 March 2011 I agree with Mr. Krishna Kumar. Short point you have to consider is that the term of the agreement provides for an auto renewal for a further period of 11 months and therefore the rent payable for the year would exceed the threshold limit of 1.8 lakhs.

Even in the case of the next 11 mths if you donot deduct TDS for the first 8 mth(remaining part of 2nd term of 11 mths)under the context that the agreement may be terminated. You cannot avoid TDS. In such case upon renewal of the agreement you have to deduct the TDS for the payments made for the whole year. You need to understand that threshold limit is not for the agreement coupled with the financial year, rather it is only for the payments made during the particular financial year.

Querist : Anonymous

Querist : Anonymous (Querist)

09 March 2011 Dear Krishna Kumar and Srinivasan

Thanks to both of you for the clarification.

Assuming that TDS provisions are attracted even if it is for residential purposes can you please advise

1)whether TDS can be avoided if the Agreement is with the the Employee instead of the Company and he gets his HRA.

2) given the above info what is the TDS on each monthly rent of Rs.20,000/-. (a)Rs.2000/- p.m. or
(b)Rs.240000-180000=(60000/12)*10%=Rs.500/-

Sorry for the trouble. I sincerely appreciate it.

CA KRISHNA KUMAR DARUKA

CA KRISHNA KUMAR DARUKA (Expert)
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09 March 2011 As regards first part of your question, TDS can be avoided if agreement is with employee and he pays the rent. However implication of taxability of HRA will remain.

As regards second part, TDS will be 2000 per month as there is no provision of deducting threshold limit from the amount being paid.

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