If you are stuck in such a situation, here is what to do.

Mr. Alok Verma is a tenant paying a monthly rent of ₹55,000 in a major Indian city. His landlady, Mrs. Sunita Sharma, has been living in Canada with her family for over five years. Recently, while preparing his financial records, Mr. Verma discovered that Mrs. Sharma’s Income Tax Return (ITR) filings clearly declare her status as a “non-resident.”

Understanding his legal obligations, Mr. Verma informed Mrs. Sharma that he would need to deduct Tax Deducted at Source (TDS) at the applicable rate of 31.2% for rent paid to a Non-Resident Indian (NRI). This did not go over well. Mrs. Sharma became aggressive, claiming her financial advisor had made an error in the ITR filing and vehemently insisted she was an Indian resident. She went as far as to threaten Mr. Verma with eviction if he pursued the “NRI landlord” issue.

To resolve the matter, she proposed adding a clause to the rental agreement, stating she is a tax-paying Indian resident who receives rent in an Indian bank account. Mr. Verma is now caught between the risk of severe penalties from the Income Tax Department and the threat of losing his home.

Advice in such cases

Navigating such a situation requires a clear understanding of your legal duties as a tenant. The onus of deducting TDS on payments to an NRI is squarely on the payer (the tenant).

• Verify the Landlord’s Status: You can check the landlord’s PAN on the income tax portal to see if it is active. While it won’t explicitly state residency, it’s a primary verification step.
• Understand the Law: A person’s residential status under the Income Tax Act, 1961, is determined by their physical presence in India during a financial year, not by their citizenship or personal declarations. Living abroad for over five years almost certainly makes them a non-resident for tax purposes.
• Agreement Clause is Not a Shield: A clause in a rental agreement declaring the landlord a “resident” has no legal standing against the provisions of the Income Tax Act. Tax authorities will be guided by the law and the facts of the case, not a private agreement designed to circumvent tax obligations.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

This case primarily involves the Income Tax Act, 1961. The key sections are:

• Section 195 of the Income Tax Act, 1961: This section mandates any person responsible for paying any sum to a non-resident, which is chargeable to tax, to deduct TDS at the rates in force. Rent paid to an NRI is taxable income in India.
• Section 6 of the Income Tax Act, 1961: This section lays down the conditions for determining whether an individual is a “resident” or “non-resident” in India for a particular financial year.
• Section 201 & 271C of the Income Tax Act, 1961: These sections outline the consequences of failing to deduct TDS, which include being treated as an “assessee-in-default,” liability to pay interest, and a penalty equal to the amount of tax not deducted.

If you are the complainant

If you are the tenant (complainant in this context), your primary goal is to ensure full compliance with the law to protect yourself.

• Communicate in Writing: Send a formal email or letter to your landlord explaining your legal obligation under Section 195 to deduct TDS. State the facts as you know them (e.g., her non-resident status as per her ITR) and request her to confirm her status along with her PAN.
• Deduct and Deposit TDS: If the landlord is confirmed to be or is reasonably believed to be a non-resident, you must deduct TDS at the applicable rate from the rent and deposit it with the government using the appropriate challan within the due date.
• File TDS Return: You are required to file a quarterly TDS return in Form 27Q.
• Issue Form 16A: After filing the return, you must provide your landlord with Form 16A, which is the TDS certificate. This allows her to claim credit for the tax deducted when she files her Indian tax return.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

As a tenant being pressured or threatened with eviction for following the law, you are the victim of coercion.

• Do Not Agree to Illegal Terms: Do not sign any addendum or new agreement with a clause that contains factually incorrect information to evade tax. This could make you party to a fraudulent act.
• Understand Eviction Laws: A landlord cannot arbitrarily evict a tenant for complying with the law. Eviction is governed by the respective state’s tenancy laws and requires specific grounds (like non-payment of rent, property damage, etc.) and a proper legal process through the courts. Deducting TDS is a legal duty, not a ground for eviction.
• Keep Records: Document all threats and unreasonable demands made by the landlord. Save emails, text messages, and record call details (date, time, summary of conversation). This evidence can be crucial if the matter escalates.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

This is primarily a tax and civil matter, not a criminal one. The police will generally not intervene in disputes related to TDS or rental agreements. They would advise you to approach the Income Tax Department or a civil court. However, if the landlord’s threats escalate to criminal intimidation (e.g., threats of physical harm or illegal dispossession), you can file a police complaint under the relevant sections of the Bharatiya Nyaya Sanhita (BNS). In such a scenario, the police would be obligated to investigate the criminal element of the threats.

FAQs people normally have

Is a clause in the rent agreement declaring the landlord a resident sufficient protection for me?
No. The Income Tax Department is not bound by a private agreement. They will determine the landlord’s status based on the facts and the law. If they find the landlord is a non-resident, you will be held liable for non-deduction of TDS, regardless of the agreement.

What if the landlord refuses to provide her PAN?
If the landlord does not provide a PAN, the TDS rate applicable becomes even higher, as per tax laws. Your obligation to deduct tax remains.

Can my landlord legally evict me for deducting TDS?
No. Deducting TDS is a statutory duty imposed on you by the government. It cannot be a valid ground for eviction under any tenancy law in India.

What are the exact penalties if I fail to deduct TDS?
You would be liable to pay interest on the amount of tax not deducted, and a penalty under Section 271C, which can be equal to the amount of tax you failed to deduct. The Income Tax Department can recover this amount directly from you.

What evidence is required?

To protect yourself, maintain a clear record of the following:

• The signed rental agreement.
• Proof of all rent payments made (bank statements).
• All written communication with the landlord regarding her residency status and TDS (emails, letters, WhatsApp messages).
• A copy of the landlord’s PAN card.
• If you have it, a copy of any document (like the ITR) that indicates her non-resident status.
• Copies of TDS challans (Form 281), TDS returns (Form 27Q), and TDS certificates (Form 16A) once you start complying.

How long will the investigation take?

This is not a typical “investigation.” It is a matter of tax compliance. If you correctly deduct and deposit the TDS, there will be no investigation against you. If you fail to comply, the Income Tax Department may initiate proceedings against you at any time upon discovering the default. Such proceedings, including notices, responses, and appeals, can be a lengthy process, often taking several months to years to conclude.

Advocate Sudhir Rao, Supreme Court of India