Do I have to deduct tax for paying rent to a non-resident landlord?

I live in a rented flat in Noida, U.P., paying a rent of less than two lakh per annum (INR). The flat owner is an NRI residing in Dubai, UAE. Please advise whether I, as a tenant, must deduct tax before paying rent every month to the NRI landlord. If yes, how much deduction is to be made, and how should I go about the formalities of deducting and depositing this amount to the tax authorities? The rented flat is for residential use only.

Incomes arising in India are taxable for all persons, whether residents or not. Under the India UAE DTAA, you are exempt from paying income tax in India on your UAE income. However, your Indian income is taxable in India. So, you must deduct tax 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 tax regarding payments, like income, made to non-residents. So, irrespective of the amount of rent you pay, you have to deduct tax while paying the rent.

While arriving at the amount on which tax is to be deducted, you can deduct 30% of the rent and deduct tax only on 70% of the rent, as the tax laws allow a standard deduction of 30% from the rent received. You have to deduct tax at 30% plus cess when making payments.

Residential Rent Payments to Non-Business Payers Exempt from Tax Deduction Account Number (TAN) Requirement

When paying rent to a resident for a residential property, the payer, who is not engaged in any business, is not required to obtain a tax deduction account number (TAN). However, since you are paying rent to a non-resident, you will have to apply for and obtain TAN to deposit tax so deducted to the government’s credit and for filing TDS returns. I would advise you to please seek assistance from a practicing CA in this matter.

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Balwant Jain is a tax and investments expert and can be reached on [email protected] and @jainbalwant on his X handle.

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