TDS on rent and on buying a property in India, in plain words

General information, not tax advice. Thresholds, rates, due dates and forms change often, so this page quotes none of them. Check the current rules on the income tax department's website or with a chartered accountant.

What is TDS?

TDS is tax deducted at source. Instead of the receiver paying all of the tax later, the person making the payment holds back a part, deposits it with the government and gives the receiver credit for it. For property, it comes up in two places: rent, and the purchase of a property.

Do I have to deduct TDS when I pay rent?

It depends on who you are and how much rent you pay. Businesses and people whose accounts are audited have one rule. Individuals and Hindu undivided families who are not audited have a separate rule that applies only once monthly rent crosses a stated threshold. If you pay rent below the threshold, no deduction is needed. Look up the current threshold for your year before you decide.

What does a tenant do if TDS applies?

1. Work out whether the rent crosses the threshold and when the duty to deduct starts.
2. Deduct the tax from the rent as the law says, or at the point the rule specifies.
3. Deposit it with the government by the due date through the tax portal.
4. File the required statement and give the landlord the proof so they can claim the credit.
5. Keep the receipts together with the rent agreement.

What about TDS when I buy a property?

When you buy a property from a resident seller for more than a stated value, the buyer generally has to deduct tax at source from the price and deposit it, not the seller. The tax is on the price, and the buyer pays the seller the balance. You usually need the seller's PAN, and the buyer files a form and gives the seller the certificate. Purchases from non-resident sellers follow different rules.

What happens if TDS is missed?

• The payer can be charged interest and a late fee for deducting or depositing late.
• The receiver may not get credit for the tax in their return.
• The payer can face a penalty for not deducting at all.

If you are a landlord, record the rent clearly. See rent agreement types and how to calculate rental yield. If you are buying, read stamp duty and registration and the registration steps. If you are selling, read capital gains tax on property.