FINANCE BILL, 2017 Amendments in TDS Provisions

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The Tax Publishers FINANCE BILL, 2017 Amendments in TDS Provisions Arundhati Kulshreshtha 1. Scope of TDS on rent extended to Individuals and HUF not being liable for tax audit The existing provisions contained in Section 194-I provide for deduction of tax at source at the time of credit or payment of rent to the account of the payee beyond a threshold limit. It is further provided that an Individual or a Hindu undivided family who is liable for tax audit under Section 44AB for any financial year immediately preceding the financial year in which such income by way of rent is credited or paid shall be required to deduction of tax at source under this section Accordingly, under the existing provisions of Section 194-I, an Individual and HUF, being a payer (other than those liable for tax audit) are out of the scope of Section 194-I of the Act. In order to widen the scope of tax deduction at source, the Finance Bill, 2017 has proposed to insert a new Section 194-IB in the Act with effect from 1-6-2017. (i) Person responsible to deduct tax under the proposed Section 194-IB Sub-section (1) of the proposed Section 194-IB provides that any person, being an Individual or a Hindu undivided family (other than those referred to in the second proviso to Section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct tax at source. (ii) Rate of deduction of tax Tax under the proposed Section 194-IB shall be deducted at the rate of 5 per cent. (iii) Time for tax deduction at source Sub-section (2) of the proposed Section 194-IB provides that the income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

FINANCE BILL, 2017

Amendments in TDS Provisions

Arundhati Kulshreshtha

1. Scope of TDS on rent extended to Individuals and HUF not being liable for tax audit

The existing provisions contained in Section 194-I provide for deduction of tax at source at the time of credit or payment of rent to the account of the payee beyond a threshold limit. It is further provided that an Individual or a Hindu undivided family who is liable for tax audit under Section 44AB for any financial year immediately preceding the financial year in which such income by way of rent is credited or paid shall be required to deduction of tax at source under this section Accordingly, under the existing provisions of Section 194-I, an Individual and HUF, being a payer (other than those liable for tax audit) are out of the scope of Section 194-I of the Act.

In order to widen the scope of tax deduction at source, the Finance Bill, 2017 has proposed to insert a new Section 194-IB in the Act with effect from 1-6-2017.

(i) Person responsible to deduct tax under the proposed Section 194-IB

Sub-section (1) of the proposed Section 194-IB provides that any person, being an Individual or a Hindu undivided family (other than those referred to in the second proviso to Section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct tax at source.

(ii) Rate of deduction of tax

Tax under the proposed Section 194-IB shall be deducted at the rate of 5 per cent.

(iii) Time for tax deduction at source

Sub-section (2) of the proposed Section 194-IB provides that the income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.