The existing tax laws required any individual using any land or building premises of the resident individual and paying a sum over Rs. 1,80,000 in a financial year to withhold tax at the rate of 10%. But the exclusion in this respect was available to individuals and HUFs who did not fall under the purview of tax audit.

The new amendment has been made in the Finance Act 2017, which calls for all individuals liable to pay rental income over Rs. 50,000 for a month or a part of month on or after 1st June 2017 during the financial year shall have to now on deduct tax @ 5% of such rental income.

Also for easing the compliance process, deductor shall not be required to obtain TAN or tax deduction account number and the deduction has to be made only once in a tax year. In lieu of such a deduction, it is suggested that the deduction be made at the time of payment or credit of rent of the last month for a given tax year (whichever is earlier). In the case when the said property is being vacated in the year, in the last tenancy month.

The provision that requires tax deduction at a higher rate in a case when the payee does not have a PAN, the deduction amount should not exceed the rent payable in the last month of the tax year or the last tenancy month as the case may be.

So, the new provision requires, individuals and HUFs who were until now exempted from withholding tax compliance i.e those who were not required to get tax audit done to make a deduction to the tune of 5% for rental payments exceeding Rs. 50,000 for a month to resident citizens from June 1, 2017. So, to avoid unnecessary prosecution, extra fees, penalty and interest payments, adhere to the new provision as prescribed.

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