Section 194I of Income Tax Act, 1961 contains provisions regarding Tax Deduction at Source on Rent
Who is liable to deduct TDS on Rent?
This section is applicable on any person (not being an Individual or a HUF who is not liable for audit us 44AB) who is responsible for payment of rent.
As per the Budget 2017, an Individual or HUF (not liable for Tax Audit) paying rent to a resident exceeding an amount of Rs. 50,000 per month is also liable to deduct TDS @ 5% under section 194-IB. This amendment will be effective from 01.06.2017
When to deduct TDS on Rent?
TDS has to be deducted on payment of any income by way of rent at the time of credit to the account of payee or at the time of payment whichever is earlier.
Rates of TDS deduction:
Person shall be liable to deduct TDS on rent at the rate of:-
• 2% for the use of any machinery or plant or equipment; and
• 10% for the use of land or building (including building) or land appurtenant to a building (including factory building) or furniture or fittings
No deduction shall be made under this section if the amount of rent does not exceed Rs.1,80,000/- during a financial year.
Also, no deduction shall be made if the amount of rent is paid or credited to a business trust, being a real estate investment trust.
Further, no deduction shall be made if payee is Government or local authorities.
For the purpose of this section-
‘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,—
(a) Land or
(b) Building (including factory building); or
(c) Land appurtenant to a building (including factory building); or
(d) Machinery; or
(e) Plant; or
(f) Equipment; or
(g) Furniture; or
Note: It is not necessary that asset is owned by the person receiving the rent.
Deductor shall file quarterly TDS return within one month from the end of quarter in Form 26Q and TDS Certificate in Form 16A shall be issued by downloading from TRACES Portal by the deductor.
What is the time limit for payment of TDS?
Apr to Feb: Amount is paid or credited before March - Within 7 days from the end of the month in which tax is deducted.
March: Amount is paid or credited in the month of March - On or before April 30
What are the due dates for filing of TDS Return and issue of TDS Certificate i.e. Form 16A?
Every deductor responsible for the deduction of tax from payment other than salary shall file
quarterly return in Form 26Q and issue quarterly TDS certificate by following dates:
Few Important FAQ's:
1. Is the limit of Rs. 180,000 for Deduction of tax at source applicable in case of each co-owner?
Ans: Where the share of each co-owner in the property is definite and ascertainable, the limit of Rs. 180,000 will be applicable to each co-owner separately.
2. Provisions regarding low deduction or no deduction of tax on rent under Sec. 194-I?
Ans: Any person to whom rent is payable may make an application in Form No.13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorizing the payer not to deduct tax or to deduct tax at lower rate.
3. What is method of taking credit of TDS on advance rent ?
Ans: On advance rent pertaining to more than one financial year, the tax is deducted at source in the year of receipt of advance rent. The credit for TDS shall be allowed to the assessee in the proportion in which such income from rent is offered for taxation for different assessment years, based on the single TDS certificate furnished for the entire advance rent.