What is Section 194I-TDS on Rent.
- Section 194I- TDS on Rental Income is described under Income tax act, 1961.
- The person (not being an Individual or HUF) who is responsible for paying of rent is liable to deduct tax at source. Also, individuals and/or HUFs who are subject to tax audit are also under an obligation to deduct the tax at source.
- TDS limit for deduction of tax on rent is Rs. 2,40,000 for the FY 2020-21.
What is the meaning of ‘Rent’ under Section 194I?
- ‘Rent’ means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any:
- Land or
- Building (including factory building) or
- Land appurtenant to a building (including factory building) or
- Machinery or
- Plant or
- Equipment or
- Furniture or
- Fittings
- whether or not any or all of the above are owned by the payee (Sub-letting is also covered).
- If the landlord collects security or advance payment at the time of letting out a building to a tenant on the condition that the deposit will be refunded at the time of vacating the building, then such a receipt is not in the nature of income and, therefore, no tax is to be deducted at source u/s 194I.
- However, advance rent (not in the nature of refundable security deposit) paid is, subject to a tax deduction.
Who is liable to deduct TDS under section 194I?
- The person (not being an Individual or HUF) who is responsible for paying any income to a resident by way of rent is liable to deduct tax at source.
- The person (not being an Individual or HUF) who is responsible for paying any income to a resident by way of rent is liable to deduct tax at source.
- In case the aggregate of the amount of such income credited/paid or likely to be credited/paid during the financial year by the aforesaid person to the account of or to the payee exceeds Rs.2,40,000 (for the FY 2020-21).
What is the rate of TDS on rent?
| S. No | Nature of Payment | Rates of tax deduction | TDS rate from 14 May 2020 until 31 March 2021 |
|---|---|---|---|
| 1 | Rent of plant and machinery | 2% | 1.5% |
| 2 | Rent of land or building or furniture or fitting | 10% (5% if rent exceeding Rs 50,000 / month is paid by individual/HUF who are not liable for tax audit) | 7.5% (3.75% if rent exceeding Rs 50,000 / month is paid by individual/HUF who are not liable for tax audit) |
Consequences of non-deduction/non-payment of TDS.
A taxpayer who is liable to deduct TDS will be liable to pay interest @ 1% per month from the date when tax is deductible till the date when tax is deducted.
A taxpayer who has deducted tax but not deposited the same to the government is liable to pay interest @ 1.5% per month from the date when tax is deducted to the date of deposit of the TDS.
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