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MHi everyone, I’m a tenant in Bangalore dealing with a complicated situation, and I’d appreciate any legal perspective or guidance.
My landlord is an NRI. As per Section 195 of the Income Tax Act, tenants are required to deduct 30% TDS when paying rent to a non-resident. I understand that this is my legal responsibility, and failure to comply could attract penalties, interest, and scrutiny from the Income Tax department.
However, the landlord is refusing to allow any TDS deduction. He’s insisting I transfer the full rent into his NRO account every month, saying:
• He already pays his taxes
• TDS will get “stuck” with the government
• It will cause cash flow issues for himWhen I brought up the legal requirement, he dismissed it and said he wants the full rent paid, as he does with other tenants. But I don’t want to violate the law just to keep things smooth.
My questions:
1. Can I add a clause in the rent agreement stating that TDS will not be deducted on the landlord’s request and any penalty/interest arising from this will be his responsibility?
2. Would such a clause hold up legally? Or will the IT department still consider me liable regardless of what’s written in the agreement?
3. Is there any legal workaround or recourse in such situations? For example, can I insist on a lower deduction certificate or some other formal declaration?I’m trying to stay compliant, but I’m also worried about jeopardizing my rental arrangement. I’d really appreciate advice from lawyers, tax professionals, or anyone who’s dealt with something similar.
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TL;DR: My NRI landlord refuses TDS deduction on rent and wants full payment to his NRO account. I know I’m legally required to deduct TDS. Can I shift the liability to him via a contract clause? Or will I still be penalised if the IT department finds out?
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Thanks in advance for any help. I want to make sure I don’t end up paying the price for someone else’s non-compliance.
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S“The TDS deducted from the rent paid must be paid by the seventh of the following calendar month.
If the tenant does not pay the TDS on time, it attracts prosecution under Section 276B of the Income Tax Act, 1961. That is, it may lead to imprisonment ranging from three months up to seven years.
When a tenant fails to deduct tax from the rent paid to an NRI landlord, the tenant may also attract a penalty equal to the TDS amount as per Section 271C of the Income Tax Act.”
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MThanks for laying this out clearly — I’m aware of these sections (276B and 271C), and that’s exactly what has me worried.
The problem is, my NRI landlord is refusing to allow any TDS deduction. He insists on full rent being transferred to his NRO account, says he already pays taxes, and even claims that he and many of his NRI friends rent out properties across India and none of them deduct TDS or face any issues.
I’ve tried explaining that I am the one liable under the law — not him — but he’s totally dismissive and says, “Nobody does it, and nothing ever happens.”
So now I’m stuck between:
• Following the law and potentially souring the rental relationship (in this market, losing a place isn’t ideal), or
• Giving in to his way and risking prosecution, penalty, and interest — just for doing what he asked.Is there any legal protection or clause I can include in the rental agreement that shifts the liability to him if he refuses TDS deduction in writing?
I know the tax department won’t care about our contract, but at the very least, I want to have it on record that he insisted on this, against legal advice. Open to any suggestions from others who’ve faced similar situations — because this feels incredibly unfair to tenants trying to stay compliant.
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SThe onus of TDS is on the deductor. No court or government department will recognise any agreement to the contrary.
Ask him to open a normal rupee account which is not NRO either in his name or any other name. Add a line in the agreement that money will be transferred to X account in Y bank. Make sure that all addresses and contact details are Indian. Then you can claim that you don’t know that you’ve rented from an NRI.
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DLuckily my NRI landlord got convinced as his CA was in agreement that this is a valid requirement.
In your case, I think you should look for a new place. IT department sending you notice later will be harder to handle than finding a new apartment with a better landlord. Unfortunately, these kind of compliance issues being put on tenant by govt is unfair and it makes it harder for tenants to even find apartments where landlords agree to this TDS 😕
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