I live in a rented flat in Noida, UP and pay rent of less than two lakhs per annum (INR). The flat owner is an NRI residing in Dubai, UAE. Please let me know if I as a tenant am required to deduct taxes before paying rent every month. Non-resident immigrant Landlord. If so, how much should I deduct and how should I complete the procedures to deduct and pay this amount to the Treasury? The rented flat is for residential use only.
Income generated in India is taxable for all individuals, whether resident or not. Under the DTAA of India and UAE, you are exempt from paying income tax in India on your UAE income. However, your Indian income is taxable in India. Therefore, you must deduct taxes at source while paying rent to the NRI landlord.
Please note that there is no basic threshold up to which you are not required to deduct taxes on payments, such as income, made to non-residents. Therefore, regardless of the amount of rent you pay, you must deduct taxes when paying the rent.
To determine the amount of the tax deduction, 30% of the rent can be deducted and tax can be deducted only on 70% of the rent, as tax laws allow a standard deduction of 30% of the rent received. When making payments, 30% plus tax must be deducted.
Residential rental payments to non-business taxpayers are exempt from the tax deduction account number (TAN) requirement.
When paying rent for a residential property to a resident, the payer, who is not carrying out any business activity, is not required to obtain a Tax Deduction Account Number (TAN). However, since he is paying rent to a non-resident, he will have to apply for and obtain a TAN to deposit the deducted taxes to the credit of the government and to file TDS returns. I would advise you to seek help from a practicing CA in this matter.
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Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant on his X account.
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