Section 194I : TDS on Rent payment

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 Rs. 1,80,000. However, in case where the gross receipts or total sales or turnover of the previous year exceeds the monetary limits by way of business or profession provided u/s 44AB ( ie 1cr in case of business and 25 lakhs in case of profession) then both the Individual or the HUF shall be responsible to deduct TDS on the payment of Rent.

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

When to deduct TDS under section 194I?

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.

It shall also be noted that when any payment to be made to the landlord is credited to a “Suspense Account” or any other account by whatever name called in the payer’s books of account, it shall be considered as deemed payment and tax has to be deducted on such amount.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

TDS Rates under section 194I

Nature of Payment TDS Rate
Rent on plant or machinery or equipment 2%
Rent on land or building or furniture or fittings 10%

 

In a case where no PAN is provided by the landlord, the TDS shall be deducted at the rate of 20%.

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 any:

  • Land or
  • Building or
  • Land appurtenant to a building or
  • Machinery or
  • Plant or
  • Equipment or
  • Furniture or
  • Fittings

How to deduct TDS on Rent payment?

  • TDS on rent hast to be deducted exclusive of service tax. Service tax liability arises if the total amount received by your landlord during the year exceeds Rs. 10,00,000. CBDT has clarified that TDS on rent has to be deducted on amount of rent and not on the amount of service tax on rent. Let’s take an example to understand: If you are paying rent of Rs. 15,00,000 and you are charging Rs.2,25,000 as service tax on it. Then TDS on rent will be calculated on Rs. 15,00,000 and not on Rs. 17,25,000.
  • In case when a landlord makes an application in Form 13 to the Assessing Officer for no deduction of tax or deduction of tax at lower rate. And if AO issue a certificate to that effect. Then payer can make deduction of tax at lower rate or no deduction of TDS based on certificate.
TDS Return for non-salary payments (Form 26)
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TDS Return for non-salary payments (Form 26)
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FAQs

When to deposit TDS under section 194I?

When the payment of rent is made during the month of April to February, it should be deposited to the government on or before 7th of the next month. And for tax deducted in the month of march should be deposited on or before 30th day of April.

How to apply 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. 1,80,000 will be applicable to each co-owner separately.

What is the point of deduction of TDS u/s 194I?

Tax should be deducted either at the time of actual payment of rent or at the time of its credit to the account of the payee whichever is earlier.

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!

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