TDS on Rent – Section 194I

TDS on Payment of Rent

A quick guide to understand the provisions of Section 194I of Income Tax Act, TDS on rent.

What is Section 194I?

• Section 194I talks about the provisions of TDS levied on rent paid.
• The person (not being an Individual or HUF) who is responsible for paying of rent is liable to deduct tax at source.
• in case the aggregate of the amount of rent credited or paid or likely to be credited or paid during the financial year exceeds Rs. 1,80,000 Rs.240,000/-
• Individuals or HUF’s who are subject to tax audit are also under an obligation to deduct the TDS.

Note: * Threshold limit for deduction of TDS on rent is increased from Rs. 1,80,000 to Rs. 2,40,000 for F.Y 2019-20 onwards.

Meaning of ‘Rent’ for the purpose of section 194I

• ‘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. Thus, Sub-letting is also covered.

Person Liable to Deduct TDS u/s 194I

• Section 194I is applicable to a person (not being an Individual or HUF) who is responsible for paying any income to resident by way of rent is liable to deduct tax at source.
• Where the aggregate of the amount of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to payee exceeds Rs. 1,80,000/- Rs.2,40,000

Note: As per the Finance Act, 2017, 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% ( With effective from 01.06.2017).

When to deduct TDS on Rent?

• TDS to be deducted at the time of credit of ‘income by way of rent’ to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier.

What is the Rate of TDS on Rent?

S.No.	Nature of payment	Rate
1	Rent of Plant and machinery	2%
2	Rent of land or building or furniture or fittings	10%

Recommended Read:

TDS Rate Chart for Financial Year 2018-19 & AY 2019-20