Mr. Rajiv is a salaried individual working with a MNC in Jaipur, Rajasthan. He is staying in his ancestral house which was built by his grandfather in 1975. During the P. Y. 2020-21, he decided to reconstruct his house f

As per provision of section 194-IB of the Income tax Act, 1961, Mr. Rajiv is required to deduct TDS on payment of rent made to his landlord @ 5% (The period 14.05.2020 to 31.03.2021, the rate is 3.75% instead of 5%) if the rent paid exceeds ₹50,000 per month or part thereof. However, Section 206AA of the Income Tax Act, 1961 requires providing of PAN of deductee, failing which tax shall be deducted at a higher rate i.e. 20%. Further, As per provision of Section 194IB of the Income tax Act, 1961, where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be. Therefore, In this case, Tax to be deducted by Mr. Rajiv from the payment made to landlord will be (₹60000*10*20%) i.e. ₹1,20,000 but restricted to rent of last month = ₹60000 [Section 194 IB(4)] as landlord does not have PAN.