Renters Paying NRI Landlords : You must sign a lease with your landlord if you are renting a property, and you are obligated to abide by its terms. There are several crucial legal obligations to keep in mind if your landlord is an NRI (non-resident Indian). A person or organisation paying rent to an NRI is required by the Income Tax Act of 1961 to deduct TDS from the rent. There might be legal repercussions if these tax regulations are broken.

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When is tax due when paying a landlord’s rent?

A person must deduct income tax at the appropriate rates when making a payment of interest or any other amount (not falling under the heading of “Salaries”) to an NRI or a foreign company, according to the provisions of Section 195 of the Income Tax Act of 1961.

 How much tax needs to be deductible?

Regardless of the amount of the monthly rent, the renter is required to deduct the tax. In other words, whether a renter pays the landlord Rs 20,000 per month or Rs 50,000 in rent, they are required to withhold tax at the appropriate rate prior to completing the payment.

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The required TDS deduction rate

The NRI landlord’s income will determine the rate at which tax must be subtracted. Tenant is required to withhold 30% of the TDS as a minimum. The rate will be 31.2% when relevant surcharges and cess are taken into account.

If the NRI landlord possesses a certificate proving that their total income in India is less than the designated exemption level, then this rate is not applied. According to the Assessing Officer’s (AO) directive, the deductor would require a certificate under Section 197 of the Income Tax Act for lesser TDS received under Section 197. The renter must complete out Form 15CA and submit it electronically to the Income Tax Department after making the TDS payment.

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Advice for both renters and landlords

Renters Paying NRI Landlords : Get a TAN number

The Income Tax Department issues the 10-digit alphanumeric Tax Deduction Account Number (TAN), also known as the Tax Collection Account Number (TAN). It is necessary in order to deduct TDS from rent payments. On the NSDL website, a TAN number application may be made.

TDS certificate issuance

The tenant is expected to provide the NRI landlord with a TDS certificate, or Form 16A, within 15 days of the end of each quarter. This certificate will be used by the landlord to submit income tax returns. Within seven days at the end of the month in which the deduction was made, tenants must pay TDS to the authorities.

Renters Paying NRI Landlords : Keep a journal

All correspondence between tenants and their landlords or agents must be kept on file. This covers texts, calls, emails, and other written communication. These might include correspondence with the landlord or papers like leases or requests for repairs.

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Timely payment of rent

Making sure that the rent is paid on time is one of the tenant’s primary duties. This will aid in avoiding any undesirable circumstances, such as eviction.

Agreement to rent

The conditions of the rental agreement must be followed by both tenants and landlords. To prevent any disagreements later, one should make sure that all the terms and conditions are included in the contract.

Renters Paying NRI Landlords : Property preservation

Tenants are responsible for maintaining the property and making repairs as needed. Furthermore, as they can be held accountable for any property damage. It is the tenant’s obligation to notify their landlord of any maintenance difficulties.

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