My wife and I, are joint owners of a Flat in Mumbai, with my wife being the 1st owner and myself co-owner. We are now planning to give out the apartment on Leave and License Basis to a party. Relatively straightforward questions, I think: 1) Should there be two cheques for the License Fee - in my wife's name and my name separately? 2) If we have a joint account, can we just take one cheque in her name - and then while filing IT returns split the License Fee amounts between us? 3) Does the licensee have to deduct TDS while paying the License Fee? What is the limit of exemption, the TDS rate, and does it have to be done on a monthly basis? Thanks
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1. See technically there should be two cheques og equal amount since there are two co-owners in case you and your wife agree one can receive the amount.
2 Yes that can be done and amount can be received in joint account.
3. TDS shall be deducted only if for per person the amount of rent recieved per year is more then 2,40,000.
If there is income tax returns issue then you can opt for 2 separate cheques or account transfer. Yes licensee will deduct tds amount from the license fees and pay you the balance
1) there can be one cheque issued for licence fee
2) open a joint account in both names
3) deduct TDS before making payment
4)All individuals or HUFs paying monthly rent to a resident in excess of Rs. 50,000 are liable to deduct TDS under section 194-IB
5)Deduct tax @ 5 % from the rent payment made to the Landlord.
1. There is no need for two separate cheques. one cheque is enough.
2. Yes, this is a good option.
3. There is no requirement to deduct TDS while paying license fees.
Dear Sir / Mr. Ajay Sethi, Thank you for your very clear pointwise response. Just one additional query.... If one cheque in the name of my wife is received for the Licence Fee, say for Rs 80,000/-, the entire TDS will be deducted from her payment. While filing returns, when we claim proportionate rent share, would it create any problem? On the other hand, if two cheques are taken for Rs 40,000/- each, in the names of the two owners, would it mean no need for TDS, as the amount per person is below Rs 50,000?
See total amount per year from rent has to be seen not below 50 thousand.
Rent payable exceeds Rs 120000 per annum then the tax at source is to be deducted which is as per under; In case of payee being: Individual/Huf 15%(SC+Cess, if applicable) Others 20%(SC+Cess, if applicabl
If licence fees are taken by your wife of Rs 80000 per month then TDS at 5 per cent has to be deducted from her payment .
2)The rental limit of INR 50k is per owner.
3) if the rent was paid equally each month of Rs 40,0000 to both the co-owner landlords, there would have been no TDS liability
If there is a joint account then a single cheque can be taken
The rent can then be split between two owners and shown as their respective incomes while filing returns
For purpose of tds, you need to give PAN numbers for both
So the licensee can deduct tds and show that as credit for both owners
The threshold i think is 20k per transaction. There was a change effected in the last interim budget
Whatever may the TDS threshold, its totally upto you whether you want to accept a common cheque or two separate cheques. For administrative purposes, common cheque is always preferable
Also digital payment can be made and transferred to joint account by splitting the rent between the two owners
Whenever any payment above threshold limit is paid by a party, the TDS becomes due and payable
Thereafter once deducted, it has to be deposited with government treasury within the prescribed period
1. You can authorize your wife to execute the leave and license agreement with the prospective tenant and also to collect the rental amount on yor behalf too, which will solve the issue instead of complicating the simple issue.
2. Yes, you can do it.
3.TDS if applicable can be done by the tenant or you can instruct him to not to deduct the same after which you can furnish a certificate for the payment of the taxes towards the rental amount
Since the property is jointly owned by both and either of one have given authorisation to the other for collection of license amount, on behalf of the other too, the license amount received as individual share shall be counted as income of each individual accordingly they may pay the income tax as per law and reflect the same in their respective ITR
Two cheques for one property on L&L may not convince the IT authorities hence better do not complicate simple things in the name of avoiding income tax or TDS etc.