TaxTMI 
TaxTMI 
Expand and rationalize the scope of TDS on rental payments : Clause 393(3)[Table: S.No. 2(ii)] of Income Tax Bill, 2025 Vs. Section 194IB of the Income Tax Act, 1961
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....xt are Clause 393(3)[Table: S.No. 2(ii)] of the Income Tax Bill, 2025, and Section 194IB of the Income Tax Act, 1961. Both provisions specifically address the TDS obligations on payment of rent by certain categories of taxpayers, but with notable differences in scope, applicability, and operational mechanics. This commentary provides an in-depth analysis of Clause 393(3)[Table: S.No. 2(ii)] of the Income Tax Bill, 2025, elucidates its objective, structure, and implications, and offers a comprehensive comparative analysis with the existing Section 194IB of the Income Tax Act, 1961. The analysis further explores the practical implications for stakeholders, identifies potential ambiguities, and suggests areas for reform or clarification. Obj....
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.... for use of any land or building (including factory building), or land appurtenant to a building (including factory building), or furniture, or fittings. * Threshold Limit: Rs. 50,000 for a month or part of a month. The provision is accompanied by a note clarifying the timing of deduction: TDS shall be deducted at the time of credit of rent to the account of the payee or at the time of payment (whichever is earlier) for the last month of the tax year or the last month of tenancy. Interpretation of Key Terms * Specified Person: While the Bill does not explicitly define "specified person" in the provided excerpt, it is reasonable to infer from the context and existing law that it refers to individuals or HUFs not subject to tax audit u/....
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....tax year or last month of tenancy. This mechanism simplifies compliance by requiring a single deduction, typically at the end of the tenancy or financial year, rather than monthly deductions. Procedural Aspects and Exemptions The provision is subject to various procedural relaxations and exemptions: * Declaration for No Deduction: Sub-section (6), read with the Table for declaration, allows individuals (including senior citizens) to furnish a declaration for no deduction if their estimated total income is below the taxable limit. * No Requirement to Obtain TAN: The provision, like Section 194IB, likely exempts payers from obtaining a Tax Deduction Account Number (TAN), recognizing the compliance burden on individuals and HUFs. * In....
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....taxpayers. Typical scenarios include: * Individuals renting residential or commercial properties for personal or family use, where the rent exceeds Rs. 50,000 per month. * HUFs leasing assets for family purposes. For Landlords (Payees) For landlords, the provision ensures that tax is withheld at source, reducing the risk of under-reporting rental income. However, it may also result in cash flow issues, especially in cases where the TDS rate (10%) exceeds the effective tax liability of the landlord, necessitating refunds. For the Revenue The provision enhances the revenue administration's ability to track high-value rental transactions and plug potential leakages. The requirement for TDS acts as a deterrent against non-reporting....
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....) Payee Resident Resident Threshold Rs. 50,000 per month or part thereof Rs. 50,000 per month or part thereof Nature of Rent Land, building (including factory building), land appurtenant to building, furniture, fittings, machinery, plant, equipment Land or building or both Rate 2% (machinery/plant/equipment); 10% (land/building/furniture/fittings) 2% (w.e.f. 1-10-2024; previously 5%) Timing of Deduction Last month of tax year or tenancy, whichever is earlier Last month of previous year or tenancy, whichever is earlier Requirement of TAN Not explicitly stated, but likely not required Not required Maximum TDS Not explicitly capped, but deduction is for last month Cannot exceed rent for last month De....
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....ss. Policy Rationale for Changes The expansion of the definition of "rent" and the bifurcation of rates in the 2025 Bill reflect a policy shift towards aligning the TDS regime for individuals/HUFs with that applicable to other payers (such as companies and firms) under the existing Section 194-I. This harmonization aims to reduce arbitrage opportunities and ensure consistent treatment across categories of payers and types of assets. Practical Implications of the Comparative Changes For Payers The 2025 Bill, by broadening the scope of rent and introducing higher rates for certain assets, increases the compliance burden and potential tax outgo for individuals and HUFs making high-value rental payments. Those renting machinery, plant, or ....