Tds on rent income - Residential property

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This discussion clarifies the rules around Tax Deducted at Source (TDS) on rental income from residential properties. It explains that if rent is paid to joint owners and each owner's share is below the £50,000 monthly threshold, TDS may not be mandatory. The conversation also explores scenarios with multiple tenants paying rent separately to a single owner, which could also exempt the payer from TDS obligations under Section 194IB, provided specific conditions like separate rent agreements are met.

DIVYESH JAIN

DIVYESH JAIN (Querist)

01 July 2021 Dear Sir,

If I am earning a rent income of suppose Rs. 52,000/- a month from an individual person then is it mandatory to deduct TDS on this amount. The property is in the name of 2 persons.

Is there any way to avoid the tds compliance?

Regards,
Divyesh Jain

CMA Poornima Madhava

CMA Poornima Madhava (Expert)

01 July 2021 If the rent is paid to the joint owners proportionately and such proportion of each owner does not exceed the threshold limit of Rs.50k pm, then no tax to be deducted at source u/s 194IB

DIVYESH JAIN

DIVYESH JAIN (Querist)

01 July 2021 How about if rent is paid by 2 persons equally to a single owner of the property of Rs 25,000/- each per month. Is tds applicable it this case?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

02 July 2021 No need to deduct per section 194IB ,provided

* the tenant should be individual's and

* separate rent agreement (properly stamped) is mandatory

to support the non deduction.

DIVYESH JAIN

DIVYESH JAIN (Querist)

02 July 2021 But Sir the section 194IB says if you are paying rent in excess of Rs. 50,000/- you need to deduct TDS at the end of financial year even if you are not under tax audit.

In my case rent is payable by an individual who does not fall under tax audit and the individual who has received the rent is the single owner of the premises.

How tds is not applicable?

Deepa B

Deepa B (Expert)

02 July 2021 As mentioned in the latest query if payer of rent exceeding Rs.50,000/-, is an individual and also the receiver of rent is also a resident individual , then TDS needs to be deducted under the said section. In case if genuinely the property is under joint ownership, then revise the rental agreement so as to get rent credited in the name of each joint owner so that no obligation arises to comply with the section.

DIVYESH JAIN

DIVYESH JAIN (Querist)

03 July 2021 The property is under single ownership so dividing the income is not possible in this case. But there are 2 tenants staying in that property. Can they equally pay the rent to escape the tds deduction to be made?

CMA Poornima Madhava

CMA Poornima Madhava (Expert)

03 July 2021 Threshold limit of 50k is for the payer of rent. Further, there is no restriction for a single owner to rent out parts of the property to different tenants. On this basis, if the property is rented out genuinely to 2 different tenants, then 194IB would not apply because threshold limit does not exceed for both the tenants.

DIVYESH JAIN

DIVYESH JAIN (Querist)

03 July 2021 Ok, Thanks for your reply

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