METHOD OF TAKING CREDIT OF TDS ON ADVANCE RENT

   
 

Situation 1: Tax is deducted at source under the provisions of section 194-I of the Act on advance rent pertaining to more than one financial year to be adjusted against future rent.

  • In case of Situation 1 above where advance rent is spread over more than one financial year and tax is deducted thereon, credit shall be allowed in the same proportion in which such income is offered for taxation for different assessment years based on the single TDS Certificate furnished for tax so deducted on the entire advance rent.

Situation 2: Subsequent to the deduction of tax at source on advance rent pertaining to one or more financial years, either:

  1. The rent agreement gets terminated/cancelled resulting into refund of balance amount of advance rent to the tenant.

  2. The rented property is transferred by way of sale, lease, gift, etc., resulting into refund of balance amount of advance rent to the transferee or the tenant, as the case may be.

  • In case of Situation 2 above credit for the entire balance of tax deducted at source, which has not been given credit so far, shall be allowed in the assessment year relevant to the financial year during which the rent agreement gets terminated/cancelled or rented property is transferred and balance of advance rent is refunded to the transferee or the tenant, as the case may be.

  • Excerpts taken from Circular no. 5 (dtd. 2nd March' 2001)