Sheetal, who relocated to Bangalore recently, rented a property from Padmanabhan, who is an NRI. The rent amount of Rs. 45,000 pm was required to be remitted to the NRO (Non Resident Ordinary) account of Padmanabhan. Sheetal’s colleague advised her not to deduct TDS as the monthly rent does not exceed Rs.50,000 pm. Should she take her friend’s advice?
1. Any payment made towards rent of a property in India to a Non-Resident Indian shall attract TDS.
Hence Sheetal is liable to deduct TDS @31.2% (tax + cess) u/s 195 of the Income Tax Act.
2. Compliance:
Sheetal is required to obtain a TAN for the purpose of deducting TDS towards payment to NRI. She should ensure that TDS deducted is remitted to the Government on or before 7th of the subsequent month. Sheetal is also required to file a TDS return every quarter with the Income Tax department on time. Failure to remit the amount of TDS deducted shall attract prosecution u/276B of the Income Tax Act.
3. Penalty:
Sheetal should also understand that failure to deduct TDS from payment made to an NRI shall attract a penalty equal to tax not deducted u/s 271C of the Income Tax Act.
4. Form 15CA & 15CB:
It is compulsory for Sheetal to file Form 15CA online on the Income Tax portal while paying Rent each time. If total rent in a financial year exceeds Rs. 5,00,000, she will be required to obtain Form 15CB from a Chartered Accountant.
5. Lower or NIL TDS:
If Padmanabhan provides Sheetal with a lower TDS or Nil TDS certificate (obtained from AO u/s 197 of Income Tax Act), then Sheetal can deduct TDS at the rate prescribed in the certificate.
NRI and related tax issues
In spite of shifting base to different geographies, many Indians keep in touch with their roots, tradition, culture and rituals as that has been the way our DNAs are made!
Income tax as a subject by itself undergoes numerous changes every year and it could be quite cumbersome to keep a tab on the innumerable changes. Recent changes to the Income Tax Act changed the way NRIs are taxed in India. With the introduction of the term “deemed resident”, it becomes all the more important to review the residential status every year. The Income Tax law is more stringent now and has more tools to track and tap information to enable effective taxing of the NRIs.
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With a 15 year experience in the Industry, Chocksi decided to commence his practice after the “Entrepreneurial Bug” bit him ! He is the Founder Partner of Chockalingam Unnamalai & Associates, Chartered Accountants.
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