TDS on Rent – Section 194I of Income Tax Act

TDS on rent has to be deducted under section 194I where the aggregate amount paid or credited or likely to be paid or credited to the account of recipient exceeded Rs. 1, 80,000 during the financial year. However, if you are jointly owner of a property then this limit will be applicable to each such joint owner i.e. TDS on rent will be deducted only when the limit of Rs. 1,80,000 exceeded for each owner.

Who is liable to deduct TDS under section 194I

Any person making payment of rent to a resident shall be liable to deduct TDS under section 194I of income tax act.

However, if the person is an individual or HUF then they have to deduct TDS under section 194I only if gross receipt or turnover from the business or profession carried on by him exceeds the limit as prescribed under section 44AB in the last financial year (i.e. immediately preceding financial year). 

Rent as defined in section 194I

Rent for section 194I has been defined in this section as follows;

Rent means any payment under lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any:

  • Land
  • Building (including factory building)
  • Land appurtenant to a building (including factory building)
  • Machinery
  • Plant
  • Equipment
  • Furniture
  • Fittings

Whether or not any or all of the above are owned by the payee

Rate at which TDS on Rent has to be deducted

  • Rent paid for plant, machinery or equipment attracts TDS @ 2%.
  • Rent for land, building or both attracts TDS @ 10%.
  • Rent for furniture or fittings attract TDS @ 10%.

If any of these assets are owned by more than one person or owners are holding such asset at a proportion rate then TDS on Rent under section 194I is required only if the share of rent for each such owner exceed Rs. 1, 80,000 in a year.

Time limit To Deposit TDS – Deducted under section 194I

Particulars TDS Deposit Due Date
TDS paid without production of income tax challan On the same day when TDS has been deducted
Tax is accompanied by an income tax challan On or Before 7 days from the end of the month in which TDS deduction is made under section 194I
Where income or amount is credited or paid in the month of march 30th April
Other cases On or before 7 days from the end of the month in which TDS deduction is made

Time Limit for Issuance of TDS Certificate

Certificate in form 16A has to be issued quarterly on or before the following dates in cases where TDS on rent has been deducted under section 194I;

For the Period TDS certificate Due Date
April to June 30th July
July to September 30th October
October to December 30th January
January to March 30th May

However, if the person deducting TDS under section 194I is from any of the offices of government then instead of above dates, they have to issue TDS certificates every quarterly on or before 15th august, 15th November, 15th February and 30th May.

Filling of TDS return

If TDS on rent has been deducted under section 194I then the deductor has to file form 26Q on or before following dates;

Period of TDS If the deductor is a Non Government Office Deductor is a Government office
April to June 15th July 31st july
July to September 15th October 31st October
October to December 15th January 31st January
January to March 15th May 15th May

Other relevant Points for section 194I

  • Where income has been credited to any account whether called suspense account or any other account in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
  • If you want lower TDS or non-deduction of TDS from your rent income then you can apply in form 13 to the assessing officer under section 197 of income tax act to get a certificate for such lower deduction or non deduction. You have to provide your PAN number to get such types of certificate.
  • If PAN is not provided by the owner then TDS @ 20% has to be deducted instead of the normal rates that are been prescribed under section 194I.
  • It has to be deducted at the basic rates as discussed above. No surcharge, education cess or SHEC shall be added to the base rate.
  • If your owner is charging service tax on rent then such service tax has to be excluded while calculating TDS. It will be charged only on the Rent part not on the services tax amount.
  • If rent is paid to government entities or any government department or any entities whose incomes are exempt from income tax under section 10 then there is no requirement of deducting TDS from the rent income.
  • If the person to whom you are paying rent is a charitable trust or a political party and such party has given you the certificate of non deduction of TDS then it will not be deducted from their rent.

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