Section 194I: TDS on Rent payment

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Hiral Vakil

TDS
TDS Sections
Last updated on February 3rd, 2023

Section 194I states that if any person has paid rent during the year and if it exceeds the specified limit then the person is liable to deduct tax at source. It generally includes rent for land, buildings, furniture & fittings, plant & machinery, etc.

What is Section 194I?

As per provisions of section 194I, any person (other than an individual or a HUF) is liable to deduct TDS on rent paid to a resident, if the amount of rent paid/credited during the financial year exceeds INR 2,40,000. However, in the case where the gross receipts or total sales or turnover of the previous financial year exceeds the monetary limits by way of business or profession provided u/s 44AB i.e. (1 crore in case of business and 50 lakhs in case of profession) then both the Individual or the HUF shall be responsible to deduct TDS on the payment of Rent.

NOTE: If the Individuals and HUF (other than those covered under audit) are paying rent of INR 50,000 or more per month to the landlord then they are liable to deduct TDS u/s 194IB.

What is the meaning of “Rent” under Section 194I?

As per section 194I, rent means any payment made under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any:

Rate of TDS u/s 194I

SectionNature of paymentTDS Rate
194I(a)Rent on the hiring of plant & machinery 2%
194I(b)Rent on other than Plant & machinery10%

When to deduct TDS?

The TDS shall be deducted at the time of credit of such rent income to the payee account or at the time of payment, whichever is earlier. The payment date shall be either :

  1. The date of actual payment of cash or
  2. The date of issue of cheque, draft, or by any other mode, whichever is earlier.

Exceptions u/s 194I

TDS Return

If the deductor has deducted tax on the amount of rent then they are liable to file a quarterly return of TDS in Form 26Q. For filling out this form the deductor is required to obtain TAN.

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FAQs

How to apply a threshold limit in case of rent paid to co-owners?

Where the share of each co-owner in the property is definite and ascertainable, the limit of Rs. 2,40,000 will be applicable to each co-owner separately.

On which amount TDS needs to be deducted?

Under section 194I tax needs to be deducted only from the amount of rent which should be exclusive of GST.

What if the tenant does not deduct TDS on rent?

If the TDS is not been deducted, penalty interest @ 1% shall be applicable per month, till the date TDS is deducted.

Got Questions? Ask Away!

  1. Hey @Dia_malhotra

    As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.

    Hope this helps!

  2. Hey @HarishMehta

    TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:

    1. Fees for professional services
    2. Fees for technical services
    3. Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
    4. Royalty
    5. Any sum referred to in clause (VA) of section 28.

    Hope this helps!

  3. Hello @the_AK,

    Against gross income, you can claim business expenses that you have incurred for earning that income. So you can claim this service fee as a business expense from the gross income received by you.

    Hope this helps!

  4. Hello @Anuj_Agarwal,

    TDS will be deducted by the company when the interest is actually paid on the securities, so at that time whoever is the owner of such security shall receive the interest and can claim credit of interest.

    Hope this helps!

  5. I have respectable salary income and 1000 insurance commission…ie old commission…not claiming any expenses…can i show it as other income in itr1 or have to file itr 3

  6. Hi @Shivam_B

    If you have income from salary and income from insurance commission (business income), then you will be required to file ITR 3.

  7. Itr 3 is so big…have to pay heavy charges…for filing…will it be defective if i do so ie reporting 1000 as other income in itr1 along with salary income…have closed down the insirance work since yesrs…i even contacted commssiom giving broker and closed my commission account…still they are showing in 26as wheress i am not receiving in real

  8. Hi @Shivam_B

    As per the recent utilities, ITD gives you the option to select only the schedules applicable to you while filing ITR.
    Thus, you are not required to go through the entire ITR 3 form. You can also prepare and file ITR on Quicko, where you can upload form 16 and add commission income under the head “Business & Profession” and file ITR 3, without any charges as Quicko is a DIY platform helping individuals to file taxes.

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