Know the TDS guidelines when renting the home from NRI

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The department has given time till 27 October for stakeholders to give comments on the proposed amendment to Income Tax rule 17A and form 10A, the CBDT said. Photo: iStock

I gave my grandson (Non-Resident Indian, NRI) apartment for rent. The tenant had agreed to deduct TDS (tax deducted at source) at the prevailing rate of 31.2%. But after taking possession of the house, he refused to withdraw the TDS and deposit it into the government’s account, citing a lengthy process. I am a sick elderly woman and cannot take legal action. What can now be done to avoid legal action by the income tax department against my grandson?

Under Indian Income Tax Law, if the payee qualifies as “non-resident” in India during the fiscal year in question, the payer must deduct TDS (source-deducted tax) at a fixed rate (plus applicable surcharge and health and education costs) On taxable income of the payee. In the case of rental income, the stated rate is 30% (plus the applicable surcharge and the deferral for health and education).

Accordingly, the payer is obliged to deduct and deposit TDS from the taxable income of the “non-resident”. In the event of non-compliance, the payer is liable for criminal consequences.

As an income earner, your grandson can deposit income tax as part of the input tax or self-assessment mechanism. The input tax must be deposited in four installments (15% by June 15th, 45% by September 15th, 75% by December 15th and 100% by March 15th). In the event of default in payment of input tax, interest of 1% per month is payable for the default period of each installment. The self-assessment tax can be deposited on or before the filing of the income tax return together with the interest for the delay in filing the input tax and the self-assessment tax.

Sonu Iyer is a tax partner and head of HR at EY India. Inquiries to mintmoney@livemint.com

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