TDS on Rent Payments
What is Rent: For the purpose of section 194-I, Rent is any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of following assets. It does not matter whether following assets used separately or together.
- Lands or
- Building (Including factory building) or
- Land appurtenant to building (Including factory building) or
- Machinery or
- Equipment or
- Plant or
- Furniture or
- Fittings
Whether or not any or all of the above are owned by the payee.
Provided that, in case of refundable security deposit or refundable advance payment is received by the landlord at the time of letting out an asset to a tenant then such type of receipts shall not to be consider as rent and therefore, no TDS on such receipts.
However, if advance rent or security deposit is not in the nature of refundable then such advance rent or security deposit is subject to tax deduction at source (TDS).
Who is liable to deduct TDS on Rent Payment – Following person are liable to deduct tds on rent payment to a resident.
- The person (other than Individual or HUF), who is liable to pay the amount of rent to a resident is liable to deduct tax at source (TDS) under Section 194-I. In this category company, partnership firm, LLP etc are included.
- Individual or HUF whose total sale, turnover, gross receipts from the business / profession carried by him exceed INR one crore in case of business or INR Fifty lakh in case of profession during the previous year under Section 194-I.
- Individual or HUF (other than those cover under section 194-I) paying rent to a resident person exceeding 50,000 per month under section 194-IB.
No TDS to be deducted in case where the rental income is credited or paid to a business trust (real estate investment trust), in respect of any real estate asset referred in Section 10(23FCA), owned directly by such business trust.
TDS Limit on Rent: – TDS on rent to be deducted if annual rent during the year exceed INR 2,40,000 under Section 194-I. In case of Section 194-IB, tds on rent to be deducted if monthly rent exceeds INR 50,000.
How Much TDS deduct on Rent or Rate of TDS on Rent Payments: –
| Sr. No | Nature of Payment | Rate of Tax Deduction |
| 1. | Rent of Plant or Machinery | @ 2% |
| 2. | Rent of land or building or furniture or fittings | @10% under section 194-I |
| 3. | Rent of Land or building or both | @ 5% under Section 194-IB |
Point of deduction of TDS under section 194-I :- Tax is required to be deducted at the time of income by way of rent to the account of the payee or at the time of payment whichever is earlier. Payment may be in cash or by issue of cheque or draft or by any other mode.
Point of deduction of TDS under section 194-IB :- Tax is required to be deducted at the time of credit of rent for the last month of the previous year or last month of tenancy (for property vacated during the year) to the account of the payee or at the time of payment whichever is earlier. Payment may be in cash or by issue of cheque or draft or by any other mode.
Time Limit on Rent TDS Payment under section 194-I
- The payment is made by or on the behalf of the government – On the same day, without using any challan form.
- The payment is made by any other person other than the government – On or before the 7th day from the end of month in which deduction is made by using challan No 281. However, if the amount is credited or paid in the month of march then tds to be deposited on or before 30th April.
Consequences of Non-Deduction or Not Deposing of TDS with Government under section 194-I: –
- If a taxpayer who is liable to deduct TDS but not deducted then interest will be levied at the rate of @1% for every month or part of a month for delay in deduction of tax. For example, if Mr. X is liable to deduct TDS of INR 10,000 in April month but he deducted TDS in June then he will be liable to pay Interest of INR 300 (10,000*1%*3).
- If a taxpayer who has deducted TDS but not deposing the same to the concern department then interest will be levied at the rate of 1.5% for every month or part of a month for delay payment of TDS. For Example, if Mr. X is deducted TDS of INR 10,000 during the April month and does not deposited tds on due date i.e. on 7th May but he deposited TDS in 7th June then he will liable to pay interest of INR 450 (10,000*1.5%*3).
Forms for Filling of TDS Returns :-
| Form No. | Descriptions |
| Form 24Q | Quarterly TDS Return in case of salary payments. |
| Form 26Q | Quarterly TDS Return in case of payment to others. (Include 194-I) |
| Form 27Q | Quarterly TDS Return in case of payment to non-resident. |
Also See, “How to file TDS Return“.
However, if tax is deducted under section 194-IB, the deductor shall furnish a challan cum statement in Form 26QC. This form should be submitted within 30 days from the end of the month in which TDS is deducted. No separately return is required in such cases.
Penalty for late Filling of TDS Returns under section 234E and 271H –
As per section 234E, the person who is required to deduct TDS will have to pay a penalty of Rs. 200 per day until the TDS return is filed. The maximum amount of penalty shall not exceed the amount of TDS.
Further, The Assessing Officer may direct a person to pay a penalty under section 271H of minimum amount of Rs. 10,000 subject to 1,00,000 on the event of fails to file the statement of TDS within the due date. The penalty under section 271H is the additional penalty to the late fee under section 234E. The section 271H is also cover the cases of incorrect filling of TDS returns.
Cases where TDS not deducted on Rent :-
- Amount Payable or Paid not exceeding Rs 2.40 Lakh during the Financial Year- No tax from the amount payable in respect of rent is deductible where the amount of such rent is credited or paid or likely to be paid or credited during the financial year to the landlord does not exceed Rs 2.40 lakh.
- In case of Individual or HUF- Where tenant is individual or HUF no TDS to be deducted on the payment of rent if – The individual or HUF is not liable to tax audit in preceding year or The individual or HUF is not carrying on any business or profession.
- In case of Government – As per section 196, no TDS from any sums payable to the government.
No Deduction or Deduction at Lower Rate under section 197 :-
The payee can apply in Form 13 to the Assessing officer for lower deduction or no deduction of tax at source (TDS) under section 194-I of the Income Tax Act, 1961. If the assessing officer is satisfied that this total income justifies no deduction or deduction of tax at lower rate, the said assessing officer may issue a certificate in Form 15AA to indicating the effect directly to the payer.
Also See, “TDS on purchase of Goods”
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