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Section 194I- TDS on Rent

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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:
  1. Land or
  2. Building (including factory building) or
  3. Land appurtenant to a building (including factory building) or
  4. Machinery or
  5. Plant or
  6. Equipment or
  7. Furniture or
  8. 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. NoNature of PaymentRates of tax deductionTDS rate from 14 May 2020 until 31 March 2021
1Rent of plant and machinery2%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.

Need Help filing your TDS Return?

You can get in touch with us at support@mywaycustom.com or give call us on 076 78414886, for all TDS related queries.

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