Is your rent payable is Rs.50,000/- or above every month? Then definitely you have one additional role now! You have to deduct 5% tax at source. This proposal has been made in this union budget in order to curb the false house rent allowance claims.
“In order to widen the scope of tax deduction at source (TDS), it is proposed to insert a new section 194-IB in the Act to provide that Individuals or a HUF (other than those covered under 44AB of the Act), responsible for paying to a resident any income by way of rent exceeding Rs 50,000 for a month or part of month during the previous year, shall deduct an amount equal to 5% of such income as income-tax thereon,” the Finance Ministry has said in memorandum to the Union Budget has said.
According to this proposal, the TDS should be deducted either on the last month of year in which rent is paid or last month of the rental period.
The law at present does not include individuals and HUFs under the section 194-I, which requires TDS for rent paid for an amount greater than 1.8 Lakhs p.a. Government has now introduced section 194-IB, where in individuals and HUFs are brought under this branch. This will come into effect from June 1, 2017.
The amount deducted should be deposited to the Income Tax department yearly once. To avoid the burden of compliance, as per section 2013A of the Act, the deductor shall not be obliged to obtain the Tax Deduction Account number (TAN). This proposal is definitely expected to bring in more citizens under the tax net.
Example of TDS calculation on rent