Section 194I- TDS on Rent

Section 194I- TDS on Rent

• The provisions of Section 194-I define how one should deduct tax at source, i.e. TDS on rent.
• The said section is primarily for individuals earning income from rent or subletting their property.
• The rent received on a property is subject to TDS since it is an additional income earned by people in business, salaried people, etc.

This guide is for the the persons paying rent for land, building, plant & machinery, furniture & fittings, etc.

About Section 194I

• The person (not being an Individual or HUF) who is responsible for paying of rent is liable to deduct tax at source.
• TDS threshold for deduction of tax on rent is Rs 2,40,000 for the FY 2022-23.
  Also, individuals and/or HUFs who are subject to tax audit are under an obligation to deduct the tax at source

Meaning of ‘Rent’ in reference to Section 194I

1. ‘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:
   land or
   Building (including factory building) or
   Land appurtenant to a building (including factory building) or
   Machinery or
   Plant or
   Equipment or
   Furniture or
   Fittings
   whether or not any or all of the above are owned by the payee (Explanation (i) to Sec. 194-I). That is, Sub-letting is also covered.
2. If the landlord collects security or advance payment at the time of letting out a building to a tenant on the condition that the deposit will be refunded at the time of vacating the building, then such a receipt is not in the nature of income and, therefore, no tax is to be deducted at source u/s 194I.
3. However, advance rent (not in the nature of refundable security deposit) paid is, subject to a tax deduction. Moreover, where any such rent is credited to ‘suspense account’ or to any other account shall also be liable to deduct tax at source.

Who is Liable to Deduct TDS u/s 194I

• The person (not being an Individual or HUF) who is responsible for paying any income to a resident by way of rent is liable to deduct tax at source.
• Individuals or HUF who are liable for tax audit are responsible to deduct tax at source under Section 194I
• The TDs needs to be deducted if the aggregate of the amount of such income credited/paid or likely to be credited/paid during the financial year by the aforesaid person to the account of the payee exceeds Rs 2,40,000.
• In Budget 2017, a new section was introduced where the individual/HUF (not covered under tax audit) paying rent to a resident exceeding Rs 50,000 per month are also liable to deduct TDS @ 5%. This amendment will be effective from 1 June 2017. However, the TDS provisions for said purpose are covered under Section 194-IB.

Rates of taxes