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TDS on rent income under section 194I

TDS on rent u/s 194I

TDS on rent income u/s 194I

TDS on rent income is applicable in day to day transactions. TDS under section 194I is applicable on payment of rent which is more than Rs. 180000 p.a. But it is not applicable in all cases. Let’s see the provision.

 

Rate of TDS on rent u/s 194I:

There are different rates applicable for tax deduction under section 194I for rent income from different assets.

TDS rate for payment to use of plant and machinery / equipment: 2%

TDS rate for any other assets like building, house, vehicle, furniture, fitting etc. : 10%

 

Who is liable to deduct TDS u/s 194I?

Following persons are liable to deduct TDS on rent :

  1. Company
  2. Partnership firm
  3. AOP
  4. BOI
  5. any person other than individual and HUF
  6. individual or HUF who is covered under section 44AB in previous year. In short whose turnover is more than Rs. 1 crore or Rs. 40 lakhs in financial year 2013-14. (for a.y. 2014-15) .

 

Threshold limit for tax deduction under section 194I:

TDS u/s 194I is required to be deducted when total payment made during the year exceeds Rs. 180000 in the current year.

Exception :

TDS on rent is not required to be deducted in following circumstances:

  1. Where total payment does not exceed Rs. 1,80,000 during the year.
  2. Payment is to government or other entities and entities whose income is  exempt u/s 10.
  3. When income receiver applies to AO for non deduction of TDS in form 13. Person can apply if his total income including rent income is less than basic exemption limit.

Rent income examples:

  1. Renting of space to put hoardings.
  2. Payments made by person other than individual or HUF for hotel rent.
  3. Composite contract when payment is made for rent income.
  4. Warehousing charges
  5. Landing and parking charges by airport authorities.
  6. Lease rentals.

 

TDS u/s 194I and service tax:

Sometimes the party who receives the payment charges service tax in bill. In that case, there is question that whether service tax should be included to calculate TDS amount or not.

This confusion was solved by CBDT via circular no. 4/ 2008 dated 28-4-2008. It clarified that tax should not be deducted on service tax amount on rent.

 

Example:

Mr. Raj charges Rs. 449440 (Rs. 4,00,000 rent + 49,440 service tax ) to Prashant for building rent.

In that case, TDS should be deducted at 10% on Rs. 4,00,000.

Total payment after deducting TDS  will be

Rs. 400000 + Rs. 49440 – Rs. 40000 = 409440.

 

TDS on advance rent:

TDS on rent is also applicable on advance rent. Following points should be kept in mind while using section 194I on advance rent:

  1. When advance is spread over years, TDS credit can be claimed proportionally as per income shown in tax return.
  2. If asset is sold to other party, new owner can claim TDS credit which was not used by previous owner.

TDS on non refundable deposit:

If property holder receives non refundable deposit, TDS should be deducted on that payment also. But If deposit is refundable, no need to deduct TDS on that payment.

 

When can you avoid TDS u/s 194I?

TDS on rent can be avoided by person whose income is less than basic exemption limit including rent income. or the person whose income tax liability is less than TDS on rent.

He can apply AO in form 13 to lower or no deduction of TDS.

 

Refund of TDS:

You can get refund of TDS if your income tax liability is lower than TDS amount. Choose appropriate income tax return form. Don’t know which form is appliacable to you read our form how to choose income tax form. Show all the income and TDS amount. You can get refund for TDS amount exceeding tax payable.

 

TDS deduction at higher rate:

If payee does not provide PAN card no, TDS is required to deducted at higher rate of 20%.

 

Other points:

  1. No surcharge is applicable on TDS payment except payment is foreign company and more than 1 Crore.
  2. No education cess is required to be added on TDS rate.
  3. Rent income on house property or building comes under income tax head ‘ income from house property’ Other incomes are covered under income from other sources head of income tax.

Recommended Read:

Online TDS payment

I have tried to cover all the points for TDS on rent in this article. I hope this article will become helpful to you. Still have any query? Ask me through  comment. Also share this article with friends and inspire me to write more.

 

 

 

 

 

11 Comments

  1. Can you provide the case where an NRI owns the property in India and its rented. TDS is deducted from the rental income. My question
    1. Under which ITR form should this income be filed (No other income received in INdia)
    2. What all deductions ex. std, property taxes, Interest on home loan etc can be claimed.
    3. What is the tax rate after the Net Annual Value is determined
    4. If the TDS deducted on the income is more than my tax liability, can i get a refund?
    5. Can the same process be applied for already filed taxes for previous years to do an amendment and file a revised taxes for pervious years?

    You detailed response to these questions will be highly appreciated.

    Thank you in advance for your replies.

  2. By S Kumar

    Whether rent paid by partnership firm in excess of Rs 180000/- to one of its partners for use of building owned by that partner is liable for TDS ?

    • By admin

      Yes, it is.

  3. By Neeraj Rakesh

    Whether the last FY rental paid in current FY is clubbed with current FY rental for deduction of TDS as his total rental is less than 180000 but due to last year rental paid in current FY exceeds the TDS limit. Whether TDS to be deducted.

  4. By K c Gandhi

    My freind made a investment in property, he even is not a IT payee also @present, now he is getting monthly rental around 1.5 lakhs, tenant is deducting 10%, but he want to avoid, is it possible to avoid tds, pl advice, nd second query he has not filed return since 7-8 years as he was financiai nd mentally disturbed , can he now file all returns, does he may have complications , harassment by IT dept

    • By admin

      He cant file all the return now. But can file last two years return. He cannot avoid TDS deduction but he can claim it as refund by filling income tax return.

  5. By asmita

    TDS limit is 1,80,000 is it inclusive of Service tax amount

  6. By jatin

    Hi, To avoid TDS can owners split the rent ? as there are three owners of property.
    How can they avoid TDS

  7. By Rengamannar Ramachandran

    I have given my land to a company for shed for rent Rs.20000 per month and TDS is deducted every month. In the FY 2016-17 the tenant is sure to vacate in June 2016. Since three months rent Rs.60000 falls below Rs.180000 can I request the company not to deduct TDS this year 2016-17?

    • By admin

      Yes, you can tell the company to not deduct tds as rent will not cross exemption limit. However, if company insists to cut TDS, file return to get back the TDS in bank account. No big issue.

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