SECTION 194I- TDS ON RENT

TDS U/S 194I: TDS ON RENT

1. What do you mean by TDS?

TDS stands for Tax Deducted at Source. TDS is a kind of tax that is deducted by the payer before making certain payments like Salary, Rent, Commission, Interest, Royalty, Professional Fees etc. to the payee.

TDS is required to be deducted at the source if the money to be paid and the money already paid exceeds a specified amount.

The Payee can claim this tax deducted by the payer while paying his income tax liability for the year, and if the TDS deducted is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TDS was to reduce the Tax evasion by the person receiving the income.

Note: -

Payer- A payer is a person or organization who is responsible for deducting TDS before paying the amount to Payee.

Payee- A Payee is a person or organization who receives the payment from the payee after the TDS deduction.

2.  What is TDS under Section 194I of Income Tax Act?

Section 194I of Income Tax Act, 1961 mandates that TDS to be deducted by the payer while making payments related to rent of plant & machinery, equipment’s, building, furniture & land to resident person.

3. When is TDS to be deducted under Section 194I?

TDS is required to be deducted: -

• At the time of payment.

            Or

• At the time of crediting the account of payee, whichever is earlier.

Few examples of date of deduction are: -

4. Who is required to deducts TDS under Section 194I?

Any person other than Individuals and HUF (Individuals and HUF required to deduct TDS, if last year turnover is more than Rs. 1 crore in case of business or gross receipts more than Rs. 50 lakhs in case of profession.) are required to deduct TDS while making payments related to rent of plant & machinery, equipment’s, building, furniture & land to resident person.

NOTE: -

This section i.e. TDS on payments related to rent of plant & machinery, equipment’s, building, furniture & land to resident person is not applicable while making such payments to non-resident.

Example: -

Q. Mr. Anand is a sole proprietor whose turnover exceeds Rs. 2 crores during the A.Y 2024-25. He pays a monthly rent of Rs 15,000 for office rent to Mr. R, besides that he also pays service charge of Rs. 6,000 to Mr. R for the use of furniture & fixture? What is the TDS implication on Mr. Anand.

A. Mr. Anand is liable to deduct TDS u/s 194I in case the rent paid (includes rent payment by whatever name called, for the use of land or building together with furniture, fittings etc.) to a resident person is more than Rs. 2,40,000 is a F.Y.

In the give case total rent paid during the year is Rs. 2,52,000 (21000*12) which is more than Rs. 2,40,000 so he is liable to deduct TDS u/s 194I @ 10%.

5. Rate of TDS under Section 194I?

The TDS rate under this Section is: -

6. Exemption under Section 194I?

No TDS if: -

• The Rent is upto Rs. 2,40,000 to a person in a F.Y
• If the deposits are refundable, however if the deposits are non-refundable then it will attract TDS.
• Payment is in the nature of lease rent, made by a lessee to lessor (being a unit located in an IFSC), for lease of an aircraft for 10 AY’s.

7. Time limit for deposit of TDS under Section 194I?

The due date for deposit of TDS is as below: -

8. What is the due date for filing of TDS return under Section 194I?

TDS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: -

9. Type of TDS return & form to be issued?

TDS under this section has to filed quarterly through FORM 26Q and the deductor has to issue FORM 16A to the employee after filing of return.

10. Fees/ Penalties for Late/ Non- Filing of TDS u/s 194I?

Following penalties/fees will be levied if there is delay in TDS deduction or delay in deposit of TDS or non-filing of quarterly return.

11. FREQUENTLY ASKED QUESTIONS?

Q. What is the threshold limit for TDS under 194I?

A. The threshold limit for TDS under 194I is Rs. 2,40,000.

Q. Are warehousing charges subject to TDS u/s 194I?

A. Yes, warehousing charges are subject to TDS u/s 194I.

Q. Is it necessary that payee must be the owner of the above-mentioned assets?

A. No, it is not necessary that payee must be the owner of the above-mentioned assets to receive rent and liable under Section 194I.

Q. Is TDS u/s 194I applicable in case of deposit in relation to rent?

A. In case the deposits are refundable, so no TDS is to be deducted by the payer and in case the deposits are non-refundable then it is subject to TDS under 194I.

Q. Is advance rent subject to TDS u/s 194I?

A. Yes, advance rent is subject to TDS u/s 194I.

Q. Would the rent exemption limit of Rs. 2,40,000 under section 194I would apply separately to each co-owner of a property?

A. In case there are co-owners in a property and each person have a definite and ascertainable share in the property, then the limit of Rs. 2,40,000 will apply to each co-owner separately.

Q. Will tax be deducted from the GST added in the rent?

A. No, GST is not considered as an income of the landlord, so it must be reduced from rent paid while deducting the TDS.

Q. Does rent include payment made to a hotel for rooms hired during the year?

A. Yes, TDS u/s 194I will be applicable for hiring hotel rooms regularly.