Rental Agreement is a policy that come under act of section 194I and or section 194-IB. In this any citizen belong to India and he is living in a rented house can reduce income tax at a rate of 2% for machinery/plant and 10% for renting in any building or any house. This can be done through cheque or DD or any online mode
A rental agreement is a legal contract between a landlord and a tenant that specifies the terms and conditions of renting a property. rental agreement can be for residential or commercial purposes, and it can be for a fixed or variable duration. A rental agreement usually contains information. You will get more information as soon as possible further more about the agreement
[ Also Read : provident fund pf claim status ]
SECTION 194-IB – Rental Agreement Act
From year June 1st 2017, 5% of tax should be deducted to tenant and deducted amount can go to bank through any authorized branches.although If income is more than 24000 no amount is deductes and No amount is deducted from business houses by section 10.
- Land
- Fittings
- Building
- Plant
- Furniture
- Equipment
What are the Guidelines for tenant:
- Citizen paying a rent of 50000 can deduct TDS under section 194IB
- He can deduct 5% tax from land lord
- He should possess PAN card
- It is mandatory to take details of PAN card of land lord
- TDS certificate should be taken at online in form of 26QC
- Land lord should be non-resident under section 195C
What are the Guidelines for land lord:
- Land lord should possess annual tax report in form of 26AS
- Tenant should observe that it obtain from TRACES website
- Land lord should pay tax regarding TDS.
- Responsible persons to deduct TDS under section 194IB:
- Person who is not liable under section 4AB can pay tax to income department.
[ Also Read : policy bazaar insurance Online Apply and Benefits ]
Rectifying details of TDS:
Details that are mentiones as wrong in PAN card are rectified by going to official portal of NDSL and then contact center at number 020-27218080 or can send mail too yininfo@ndsl.co.in
What is FORM26QC?
Form 26Qc s a challan cum document that come under TIN website is used to report TDS under section 194IB in income tax department.
As well as Due date of payment of TDS: Rent on a TDS can be pays within 30 days from beginning of month in which deduction is made after that your will be considered
What Informations Does Rental agreement have
- names and addresses of the landlord and tenant of the land or may the assets of them
- Information about the description and address of the property
- Taxable amount like rent amount and due date
- security deposit amount and refund policy
- Usability of the things like utilities and services provided by the landlord or ant
- rights and obligations of both parties
- clauses for termination, renewal, subletting, maintenance, etc. Know more on @ Official Website
Rents Percentage of TDS on Rental Agreement
| Type of Property | Rate of TDS for Resident Landlord | Rate of TDS for Non-Resident Landlord |
|---|---|---|
| Land or building | 10% | 30% |
| Plant or machinery | 2% | 30% |
| Furniture or fittings | 10% | 30% |
What are the benefits of a rental agreement?
A rental agreement has several benefits for both the tenant and the landlord, such as:
- It specifies the duration of the rental period, the amount of rent, the mode of payment, the due date, and the late charges (if any).
- It states the responsibilities and obligations of both parties regarding the maintenance, repairs, utilities, security deposit, subletting, etc
- It provides a legal proof of residence for the tenant, which can be used for various purposes such as obtaining a ration card, an Aadhaar card, a voter ID card, etc.
- It safeguards the tenant from any illegal eviction or arbitrary rent increase by the landlord.
- It ensures that the landlord receives timely rent payments and does not incur any losses due to damage or misuse of the property by the tenant.
What are the types of rental agreements?
There are mainly two types of rental agreements in India:
- Lease agreement: A lease agreement is a long-term rental contract that lasts for a minimum of 12 months. It is governs by the Rent Control Laws of each state which regulate the rent amount, the rights and duties of both parties, and the grounds for termination of the lease. A lease agreement is usually registered with the sub-registrar’s office and involves payment of stamp duty and registration fees.
- License agreement: A license agreement is a short-term rental contract that lasts for up to 11 months. It is not governed by the Rent Control Laws and gives more flexibility to both parties to modify or terminate the terms of the agreement. A license agreement is usually not registered but only notarized by a lawyer and involves payment of nominal stamp duty.
What are the contents of a rental agreement?
A rental agreement may vary from place to place, but it usually contains the following information:
- Names and addresses of the landlord and the tenant and/or their agents.
- Description and address of the property being rented.
- Date of commencement and expiry of the rental period.
- Amount of rent and security deposit and their modes of payment.
- – Terms and conditions regarding maintenance, repairs, utilities, subletting, etc.
- – Rights and obligations of both parties regarding access, inspection, notice period, etc.
- – Clauses for dispute resolution, indemnity, force majeure, etc.
- – Signatures of both parties and witnesses.
How to draft a rental agreement?
A rental agreement can be drafted by following these steps:
- Choose the type of rental agreement (lease or license) suitable for your needs.
- Decide on the essential terms and conditions of the rental contract, such as rent amount, security deposit, duration, etc., after mutual discussion and negotiation with the other party.
- Download a rental agreement format from a reliable source or consult a lawyer for drafting a customized one.
- Fill in the details of both parties and the property in the rental agreement format.
- Print the rental agreement on a stamp paper of appropriate value (as per state laws) or attach plain paper with adhesive stamps.
- Get the rental agreement got Sighn by both parties and two witnesses.
- Get the rental agreement notarizes by a lawyer (for license agreements) or registered with the sub-registrar’s office (for lease agreements).
How to register a rental agreement?
A rental agreement can be registeres by following these steps:
- Visit the nearest sub registrar’s office along with both parties, two witnesses, and original documents such as Aadhaar card, PAN card, electricity bill, etc., for identity proof and address proof.
- Pay the stamp duty and registration fees as per state laws. The stamp duty is usually calculate as a percentage of the annual rent plus security deposit. The registration fees are usually nominal fixed charges.
- Submit two copies of the rental agreement along with photocopies of identity proof and address proof to the sub registrar. One copy will be retained by the sub registrar and one copy will be returned to you after registration.
- Collect your registered rental agreement after verification by the sub-registrar.
How to pay TDS on rent?
TDS (Tax Deducted at Source) on rent is applicable when an individual or an entity pays rent exceeding Rs. 2.4 lakh per annum to another individual or entity. The payer has to deduct TDS on rent at 10% (for land, building or furniture) or 2% (for plant or machinery) under Section 194I of Income Tax Act. However, if the payee does not provide PAN, the TDS rate is 20% under Section 206AA. The payer has to deposit the TDS amount to the government account within 7 days from the end of the month in which the deduction is made. The payer also has to file a quarterly TDS return and issue a TDS certificate to the payee.
TDS on rent can be paid online by following these steps:
- Visit the e-payment portal of the Income Tax Department and select “TDS/TCS” as the payment type.
- Fill in the details such as PAN, name, address, email, phone number, etc., of both the payer and the payee.
- Select “194I – Rent” as the tax applicable and enter the amount of rent paid and TDS deducted.
- Select the bank name from which you want to make the payment and click on “Proceed“.
- You will be redirected to the net banking page of your bank. Enter your login credentials and confirm the payment.
- You will receive a challan with a Challan Identification Number (CIN) as a proof of payment. Save or print the challan for future reference
Frequently Asked Questions
Q: What is a rental agreement?
A: A rental agreement is a contract between a landlord and a tenant for renting a property.
Q: What are the types of rental agreements in India?
A: There are two types of rental agreements in India: lease agreement and lease and license agreement
Q: What is the difference between lease agreement and lease and license agreement?
A: A lease agreement is for a minimum of 12 months and is governed by the Rent Control Laws. A lease and license agreement is for up to 11 months and does not fall under the Rent Control Laws.
Q: What are the contents of a rental agreement?
A: A rental agreement usually contains the names of the parties, description of the property, amount and mode of rent payment, security deposit, utilities, facilities, rules and regulations, and termination clauses
