Section 194I of income tax act
The rent received from renting out or subletting of property is subject to tax deduction at source i.e. TDS on rent. Further, provisions of section 194I of income tax act prescribes how one should deduct TDS on rent.
This is a tax deducted at source, which means collecting tax on various income. It makes payer liable to deduct TDS before making payment.
Moreover, TDS is of various types like TDS on salary sec.192, TDS on professional fees sec.194J,TDS on interest income sec. 194A and TDS on rent sec.194I etc.
Here in this article we discuss the provisions of TDS on rent under section 194I of income tax act 1961.
What is TDS on rent as per section 194I of income tax act??
This section primarily for individual earning income from rent or subletting their property. And as per this section tenant needs to deduct TDS before making payment of rent to owner.
This means tenant is require to deduct TDS before making payment of rent to owner.
When house property, Land & Building given on rent is subject to tax deduction at source if rent amount exceeds the threshold limit.
And section 194I of income tax act defines the provisions related to TDS on rent. And applies to those who earns rental income from house property , land & building.
Rent receive is subject to tax deduction at source u/s 194I, being an additional income earns by the owner . And according to this section a person who pays rent is liable to deduct TDS on rent when total rent paid or likely to be pay in any financial year exceeds Rs.2,40,000.
Who deduct TDS under section 194I of income tax act??
A person other than Individual/HUF who has paid rent or likely to pay rent of more than Rs. 2,40,000 in financial year to landlord is liable for deduction of TDS on rent @ 10%.
However, Individual/HUF pays rent exceeding Rs. 50,000 in a month are also liable to deduct TDS on rent payment @ 5%. In brief, this section applied to tenant being an individual/huf whose books of accounts are subject to tax audit during financial year shall deduct TDS.
What is the meaning of rent under section 194I of income tax act??
Rent means any payment by whatever name called made to an individual under lease, sublease or tenancy or any other agreement for using their property. Here property includes Land & Building, Machinery, Plant & Equipment’s, Furniture and fittings etc.
What type of rent is paid under this section?
Following type of rent payments are done in this section i.e. example of payment of rent
Further, Rent from factory Building, Rent from furniture or building by two individual, Hall rented by association, house rent,Payments to hotels for holding seminars including lunch,Payments for hotel accommodation on regular basis,Charges regarding cold storage facility etc.
What is the rates of TDS on rent u/s 194I??
There are different rates of TDS prescribe for payment u/s 194I are as under:
| Type of rent payment – Rent paid for | Rate |
| Plant & Machinery | 2% |
| Land & Building (Properties) | 10% |
| by Individual/HUF | 5% |
| furniture & fittings | 10% |
Note: 1. PAN is mandatory for deduction of TDS, if no PAN TDS will be deducted at 20%.
2. Surcharge is levied on TDS on rent if paymen is above Rs.1 crore and foreign company is involved.
When to deduct TDS on rent?
TDS on rent is deducted when an Individual/HUF or any other person credit or pay the rent amount to the landlord’s accounts.
What are the cases where section 194I is not applicable??
It means exception to section 194I
- Amount paid or payable as rent is not more than Rs. 2,40,000.
- Payment to Govt. Agencies i.e. no tax is required to be deducted at source when ay amount is paid to the Govt. Agencies.In brief, Rent of any kind is payable to govt agency,local or statutory authorities tax deduction at source is not applicable as per section 10(20)(20A) of income tax act.
- According to section 194I when proceeds are shared between film exhibitor & distributor who owns cinema theatre , there is no such charges levied. It means neither exhibitor rents out the theatre nor film distributor acts as tenant,
- The tenant is an individual/HUF who is not liable for tax audit as per section 44AB of income tax act
What is the due date of payment of TDS on rent??
TDS on rent shall be paid on or before due date as may be specified.
This has to be deducted at the time of payment or credit of rent to the owner or landlord. Payment to the government needs to be made within 7 days from the end of the month in which the deduction is made. In case the amount has been paid/ credited in March, the deadline is 30th of April.
Due date of filing return of TDS on rent
| Period | Due date to deposit TDS on rent |
| April – June | 3oth july 2022 |
| July – Sept | 31st Oct 2022 |
| Oct – Dec | 31st Jan 2023 |
| Jan – Mar | 31st May 2023 |
What if TDS is not deducted ??
If tenant deducted TDS but fails to pay to govt then he/she liable to pay interest at 1.5% per month.
And if TDS is not deducted than he/she sahll be liable to pay interest at 1% per month.
In addition to interest, tenant is also liable for late filing fees mentioned u/s 234F i.e. 200 per day or amount of TDS whichever is lower.
TDS Certificate for Rent
Every person who deduct TDS is duty bound as per section 203 of the income tax act to furnish a certificate to the payee that acknowledges tax deduction. This certificate is known as TDS certificate. For TDS on rent payment form 16A is issued after every quarter.
Due date for issue of TDS certificate on rent??
| Period | Due date to issue TDS certificate |
| 1st Quarter – Apr to Jun | 15th Aug 2022 |
| 2nd Quarter- Jul to Sep | 15th Nov 2022 |
| 3rd Quarter- Oct to Dec | 15th Feb 2023 |
| 4th Quarter- Jan to Mar | 15th Jun 2023 |
Conclusion:
- Tanent will deduct TDS at the time of payment of rent
- TDS shall be deducted if rent payment exceeds Rs. 2,40,000.
- If Individual/HUF is a tenant , rent payment exceeds Rs. 50,000 per month and whose books of accounts are subject to audit u/s 44AB.
Example of TDS
XYZ Ltd makes payment towards Rent Rs.60,000 per month for office building to Mr. Yash. who is resident earning rental income u/s 194I . Here rent payment for the year is Rs. 7,20,000 (60,000×12). Here in this case, XYZ Ltd paying rent above Rs. 2,40,000 to resident person shall deduct TDS as per section 194I. XYZ ltd paying rent which is the source of income to Mr. Yash and hence it is the duty of company to deduct TDS on rent u/s 194I.
In addition ,as per the provision of section 194I of income tax person shall deduct TDS on rent if rent payment exceeds RS. 2,40,000.
Here, Total rent amount during the year is Rs. 7,20,000
XYZ ltd will deduct TDS at 10% i.e. 60,000×10% = Rs. 6,000 per month . and deposit to govt. on or before due date specified above.
Refere: https://taxandfinanceguide.com/what-is-tds-in-income-tax-act/ and https://taxandfinanceguide.com/tds-on-salary-u-s-192/
