Query regarding TDS deduction on rent paid to UAE-based NRI property owner

The tax liability arises based on Section 195 of the Income-tax Act, 1961.

If you pay rent to NRI, then TDS @ 30% +surcharge + 4% cess must be deducted from the actual rent payable. TDS must be deducted irrespective of the amount of rent paid to NRI as there is no limit on the rent payment. The taxpayer must pay TDS on rent on or before seven days from the end of the month in which deduction is made, where tax is paid accompanied by an Income-tax Challan.

However, NRI may obtain no or lower deduction certificate in case his income in India is less than the basic exemption limit (i.e. Rs 250,000 for FY 2022-2023)

For deduction at a lower rate or no deduction of TDS on rent, a payee should apply Form 13 to the Assessing Officer. If the Assessing Officer is satisfied that total income should be under no deduction or deduction at a lower rate, a certificate will be issued. The officer will issue a certificate in Form 15AA from that effect to the payer.

Do not forget to download and fill out the TDS certificate in Form 16C on time and issue the same to the owner within 15 days from the challan-cum-statement furnishing due date mentioned in Form 26QC.

Visit the Website: First, you need to visit the Tax Information Network of the Income Tax Department website and scroll down to find the quick links. 2. Choose the Category: In the Quick Links list on the left side of the screen, you need to click on ‘Tax Payments Quick Links’ and then click on ‘TDS on Rent of Property’. 3. Find Another Quick Link: By clicking, you will reach the ‘TDS on Rent of Property’ page. Click on the ‘Online Form for Furnishing TDS on Rent of Property (Form 26QC)’ to open up the TDS for rent form. 4. Find the Form: On the next page, you will find a list of forms available in the category ‘TDS on Rent of Property’. Click on the ‘TDS on Rent of Property (Form 26QC)’ option from the list. 5. Provide Your Details: You will find a form on your screen. Provide all the required details about your property, address, tax payment, and more. 6. Submit the Form: Once done, you may submit the form and make the tax payment as instructed on the website. Or Pay TDS on Rent with Your Bank Online/Offline options.

Thank you for the detailed answer. This is very helpful!

In case the NRI landlord obtains the no deduction certificate, is there any further action required by the tenant, like furnishing the no TDS deduction information to the tax authorities, or any other compliance measure? Does this certificate relieve all responsibilities of the tenant in this regard?

It is advisable to enclose "no deduction certificate" with ITR (by Tenant).

Yes, this certificate will relieve tenant from liability of tds deduction at the time of paying rent and other tax form requirements for the said financial period (as per form 15AA).

Rent to an NRI owner: Sec 195, not 194-IB:

• Any rent paid to a non-resident landlord attracts TDS under Sec 195, at 30% + surcharge + 4% cess (31.2%) on the rent, with no threshold. 194-IB (2%, residents only) doesn't apply.

• The tenant needs a TAN (Form 49B), deducts at each payment, deposits by the 7th of the next month (challan 281), files Form 27Q quarterly, and issues Form 16A. File Form 15CA (and 15CB if the rent exceeds Rs 5 lakh a year, unless a CA certificate isn't needed).

• Lower deduction: the NRI can obtain a Sec 197 certificate (lower or nil rate), considering the 30% standard deduction and their slab. Then deduct at that rate.

• The landlord receives rent into an NRO account. Repatriation up to USD 1 million per year with 15CA/CB.

• Missing this makes the tenant liable for the tax, interest and fees (Sec 201).