Page 18 - Banking Finance December 2022

LEGAL UPDATE

business or profession exceeds Rs. 1 it is not applicable on the refundable TDS will be deducted at 10% if the rent
crore (in case of business) or Rs. 50 lakh security deposit amount that a tenant exceeds the threshold of Rs. 2.4 lakh
(in case of profession) during the pre- pays in lump sum to the landlord. How- per co-owner per year; which is not
vious financial year and when the land- ever, TDS provisions will be applicable happening in this case (rent paid to B
lord is an Indian resident. The thresh- in case of non-refundable deposits is Rs. 2.16 lakh and to C is Rs. 1.8 lakh).
old limit for TDS in this case is Rs. 2.4 which are in the nature of rent. Therefore, TDS will not be applicable
lakh per annum. The rate at which TDS in this case.
When the rented property has co-own-
is required to be deducted is 10%.
ers, a separate threshold limit is appli- As for the taxability for B and C, the
Section 194IB: It is applicable to indi- cable to each co-owner. For instance, rent received will be taxed under the
viduals and HUFs who are not covered if an assessee is required to deduct TDS head 'income from house property'.
under section 194I and when the land- under section 194I; and the total rent However, B is not entitled to receive
lord is resident. The threshold limit here is Rs. 4 lakh to be paid to two co-own- rent in cash as the amount exceeds Rs.
provided is Rs. 50,000 per month. The ers, then separate limits of Rs. 2.4 lakh 2 lakh, which is in violation of section
rate at which TDS is required to be will be available for each of the co- 269ST of I-TAct, 1961, and penalty
deducted is 5%. TDS shall be deducted owners. under section 271DA can be levied,
in the last month of the previous year which is equal to the amount of re-
Let's understand this with an example:
or the last month of tenancy (in case ceipt.
A is an individual engaged in business
the property is vacated during the Penalty for not deducting TDS
and his turnover in the previous finan-
year), whichever is earlier. A person who fails to deduct TDS will
cial year is more than Rs. 1 crore. He
In cases where the rent is paid to a be liable to pay interest on a monthly
is paying rent to B and C who are co-
non-resident, 30% TDS is to be manda- basis at 1% (In case TDS is not de-
owners of the residential property
torily deducted under section 195 with- ducted or paid) or 1.5% (in case TDS is
where he stays. The rent paid to B is
out any threshold rules on how much deducted but not paid). The late fees
Rs. 18,000 per month and that paid to
rent is paid and the income of the ten- for not filling TDS return is Rs. 200 per
C is Rs. 15,000/- per month. The said
ant. day.
rent is paid in cash by A.
In case where the tenant fails to file
TDS provisions on security de-
In this case, section 194I is applicable
the statement of TDS within the due
posit as A is engaged in business and his turn-
date, penalty ranging from Rs. 10,000
The provision of TDS is applicable only over in the previous financial year is to Rs. 1 lakh can be levied under sec-
on the amount of rent paid; therefore, more than Rs. 1 crore. tion 271H.
The power of commas and colons in RBI speak
Central bank watching is like an art form, fascinating in all its nuances, as also a science, a skill to develop. Central
bank actions and communications are as much as what is said as what is left unsaid. It is both reading the lines as
well as reading between the lines.
Prior to 1994, the federal funds rate set by the Federal Open Market Committee (FOMC) in the US had to be inferred
by the market from central bank actions in the money markets. It was only thereafter, that the Federal Reserve
began to release statements announcing changes to the Fed funds rate. Ever since, central bank communication has
greatly advanced. Globally, central bank transparency in communications is driven by the objective of influencing
expectations that has an impact on the goal variables of inflation and growth.
Central bank communications in India, too, have come a long way - from the semi-annual monetary policy statements
in April and October to a bi-monthlymonetary policy when India instituted a flexible inflation targeting regime. The
Reserve Bank of India publishes excellent information - speeches from the top management, annual reports, reports
on currency and finance, monthly RBI bulletins, monetary policy reports, governor's address, monetarypolicy
statements and the MPC minutes.

18 | 2023 | JANUARY | BANKING FINANCE