Nri gifting rent to parents to avoid tds

Hi,

I am an NRI(working in Singapore), recently bought a house in India. My parents are staying in that house, also about to rent out the 3 shops in ground floor and 1 portion of the house in the same building.

So far I am not an assessee as I don't have any income so far. Now If I rent out the shops, the need to deduct the 30% TDS, which is a very tedious process for tenants(hence tenants not interested in taking) as well as for me. I am happy to pay whatever tax I need to pay but wanted to avoid these TDS problems.

Is any of this options works? or any other better options?

a) The property is in my name, I gift rights to stay and sublet to my parents. Since my parents are not NRI, there is no question of TDS and they show this as their income and pay tax accordingly.

b) I will rent it out to my parents as an annual lease of say 350,000 for the whole building whereas they stay in one portion and rent it out the rest of the building for say 40,000 a month. So the tenants don't need to worry about also my parents pay me the rent on annual basis, TDS process will happen only once a year. I will pay my portion income tax and my parents will pay their portion of income tax.

I prefer option 1 as there is no involvement of TDS, can that be done?

Thank in Advance.

Regards

Gupta.

Since my parents are not NRI, there is no question of TDS and they show this as their income and pay tax accordingly. - I do not think this is the correct approach. Any payment (even a single rupee) to an NRI comes within the scope of Section 195 and TDS @ 30.90% need to be deducted - this applies even if parents pay rent to NRI son.

You can try obtaining a NIL/lower TDS certificate from AO - however, I don't think AO will issue NIL certificate given the quantum of rent which will make your income taxable for the year. Even if case of nil deduction, tenant has to still file a NIL return in Form 27Q

In my view, you can have an arrangement with tenant to collect rent on a quarterly basis to reduce the paperwork etc. - now a days TDS deposit and return filing is completely online - you will also keep the rent a bit low than prevailing rate in locality to compensate for this extra effort on part of the tenant & the fact that you collect a bigger upfront rent.

As regards option 2 whereby you rent to parents on an annual lease basis & your parents sub-let it - please check that legal aspects are taken care of in this kind of an arrangement esp. where you do not have a direct contract with the tenant.