How to file TDS returns for rental income?

Posted In | Finance | Accounting Software | India Accounting Tax

Filing Tax Deducted at Source (TDS) returns for rental income is a critical obligation for everyone who earns income from rent. Failure to do so can result in penalties and legal repercussions. This article will provide a comprehensive guide on how to file TDS returns for rental income.

 

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Understanding TDS on Rental Income

TDS on rental income is a way for the Indian Government to collect tax at the point of generation of income, rather than at a later date. As per the Income Tax Act, 1961, every individual who pays rent is required to deduct TDS if the annual rent payment exceeds a certain limit. The current limit, as of the financial year 2019-20, is INR 2,40,000.

 

Steps to File TDS Returns for Rental Income

Here is a step-by-step guide on how to file TDS returns for rental income:
 

Step 1: Tax Deduction

The first step involves deducting the tax at the source. When a tenant pays rent to the landlord, they must deduct the TDS before making the payment. The current rate of TDS on rent is 10% if the rent amount exceeds INR 2,40,000 in a year.
 

Step 2: TDS Payment

Once the TDS is deducted, the tenant must deposit it with the government through Challan ITNS 281. This deposit should be made within seven days from the end of the month in which the deduction was made.
 

Step 3: TDS Return Filing

The next step is to file the TDS returns using Form 26QC. This form is a statement cum challan form for the TDS returns for rent under section 194-IB.

 

Step 4: Issuing TDS Certificate

After filing the TDS return, the tenant must issue a TDS certificate to the landlord. This certificate is Form 16C, and it serves as proof that the tax has been deducted at source and deposited with the government.
 

Step 5: Verification

Finally, the landlord should verify the TDS details in their Form 26AS. This form is a consolidated tax statement, and it should reflect the TDS deducted by the tenant.

 

Filing TDS returns for rental income is a straightforward process if you understand the steps involved. By following the processes laid out in this guide, you can easily fulfill your tax obligations and avoid any legal issues.