Tax Deducted At Source

Are you receiving rent on property? Earning agricultural income? Learn more about taxation on such income.

Key Points

• For income received by way of rent, tax is required to be deducted at source by the payer if the income exceeds Rs 18000 during the financial year.
• Income earned from agricultural operations is non-taxable according to the provisions of the Income Tax Act, 1961. However, if this income is invested in bank deposits, it is taxable according to the IT assessment norms.

Q: I have been receiving rent of Rs 14000 per month from a company since April 1, 2011. I had requested the licensee/lessee to pay the rent for the month of April 2012 in March 2012 itself. However, because I took the said advance rent, the lessee company has deducted tax at source. Are they right in doing so?

- Rajendra Mehta

A: In accordance with Section 194i of the Income Tax Act, 1961, tax is required to be deducted by the payer if the rent paid/credited during any financial year in the aggregate exceeds Rs 180000. In your case, had you not taken the advance, the total payment would not have exceeded Rs 180000 and hence, no tax deduction at source would be necessary. However, since you have taken the advance, the payment during the financial year exceeds Rs 180000, and the payer is bound by law to deduct tax at source. Hence, the company is within its right to deduct tax at source on the payment made to you.

Q: I am in receipt of agricultural income, which is non-taxable. I had invested the same in fixed deposits with a bank. Now, the interest received on the deposit with the bank is taxable. How can I save on this tax?

- Vasudev Bagkar

A: In accordance with the provisions of Section 10(1) of the Income Tax Act, 1961, agricultural income is not taxable. However, if such income is invested in deposits with a bank, the same would be taxable.

You will be entitled to basic exemption depending on the type of individual you are, i.e. whether you are a senior citizen, or whether you are a woman assessee aged less than 60 years. Further, you would be entitled to eligible deductions under Chapter VI A such as investments in LIC, NSC, PPF, RPF, etc. u/s 80C, Mediclaim insurance premium u/s 80D and so on.

You may, if you so desire, invest the said income in mutual funds whose distributed incomes are exempt. Then, the same would not be taxable.