section 115h
Tax Provisions for NRIs under section 115H
May 9, 2018
form 8938
Why Should I File Form 8938?
May 9, 2018
section 194I

Section 194I – TDS on Rent

Last Update Date : August 13, 2018

section 194I

Success is never owned. It’s rented, and its due every day.  However, the rent of property that is due monthly, is applicable to TDS.  This guide covers the TDS applicable on rent under section 194I.

What is Rent?

Excluding individuals and HUF, who are paying rent to a resident, the person must deduct TDS if the aggregate amounts is greater than Rs 1,80,000 per annum. Individuals and /or HUFs who are subject to tax audit are also under this obligation to deduct TDS. The definition of rent also includes service charge payable irrespective of the name under which it is paid.

The term “Rent” means any payment given in lease, sub-lease, tenancy, or any other agreement or arrangement for the use of the following either separately or together:

  1. Land; or
  2. Building (including factory building); or
  3. Land appurtenant to a building (including factory building); or
  4. Machinery; or
  5. Plant; or
  6. Equipment; or
  7. Furniture; or
  8. Fittings if any or all the above are owned by the payee.

In cases where the landlord collects advance payment in the form of deposit on a condition that it will be refunded at the time of vacating the building, no TDS is to be deducted since such deposit is not a form of income. However, if rent is paid in advance, not in the nature of refundable security, is subject to deduct TDS.

Rates of TDS

section 194I

When is TDS Deducted?

Section 194I do not mandate TDS should be deducted on monthly basis. When rent is credited on annual basis, TDS will also be deducted once a year. In case rent is credited quarterly, TDS also gets deducted quarterly.

Deductions Included u/s 194I

Section 194I describes TDS to be deducted on rent. But the following are a few cases, where income is an indirect rent and hence TDS must be deducted.

  1. Payments made to cold storage facility: When certain perishable goods are to be preserved in a cold storage. The payment made for such storage is towards the facility and not the building or land. So, TDS will be deducted on the amount for cold storage facility only.
  2. Payment made to hotels: When a certain hotel is used for conducting a seminar or a meeting followed by food, and the hotel charges only for food 194i does not apply. In this case section 194C will be applicable for catering services.
  3. Rent paid by an association for use of a hall: The association is termed as an association of persons and not as an individual or HUF, the obligation of tax deduction will be there, provided payment for the use of hall exceeds Rs. 1,80,000.
  4. Rent received by let out of factory: When a factory is given on rent, the owner receives rent which at times, is considered as income from property. In such cases, rent is treated as business income and the owner is required to pay advance tax on it.
  5. Service charges paid to business centre: Service charges that are paid to business centre are also considered as rent.
  6. Rent from furniture or building by two individuals: When the building and furniture is let out by two different individuals, the tax is deducted only from the building rent.

Non-Deductible of TDS u/s 194I

  1. Amount of rent paid/ payable does not exceed Rs.1,80,000 p.a.: No tax is deductible where the annual rent paid/ payable does not exceed Rs.1,80,000.
  2. When the tenant is an individual or HUF: No TDS deduction is required where the tenant is an individual or HUF, who is
  3. Not involved in any business/profession
  4. Not liable for tax audit in the preceding year.
  5. Payment made to a government agency: If rent is paid/payable to a government agency, section 196 states that no TDS is to be deducted.
  6. In case of sharing or proceeds of film exhibition between a film distributor and a film exhibitor owning a cinema theatre because exhibitor doesn’t let the cinema hall to the distributor.

Filing of TDS Return

To deduct TDS under section 194I, the deductor must file Form 26Q on or before the following date:

Period of filing Deductor is Non-Government officer Deductor is Government Officer
April-June 15th July 31st July
July-September 15th October 31st October
October-December 15th January 31st January
January-March 15th May 15th May

Issue of TDS Certificate

Non-salaried individuals are issued TDS certificates, as per rule 31, on a quarterly basis in form 16A.  The certificate must be issued on or before the dates mentioned.

It is mandatory for all the deductors to issue TDS certificate in Form No. 16A, as per CBDT Circular No. 1/2012, as on 9-4-2012, by generating the certificate through TIN central system.  It can be downloaded from the TIN website using the unique TDS source certificate number. These provisions are applicable in respect of all amounts deducted on or after 1-4-2012. The certificate issued can be verified either by using digital signature or manual signature.

Deadlines to Deposit TDS

Payee Due Date
Where the payment is made by or on behalf of Government

 

On the same day

(without using any challan)

Where the payment is made in any other way other than Government:

1)      If the amount is paid or credited in the month of march

2)      Any other case

On or before 7 days from the end of the month in which deduction is made where tax is paid along with an Income Tax Challan.

On or before April 30th.

To know how to utilize the tax saving options available to you and for better tax saving and planning options, consult your personal tax expert at H&R Block India.

Not sure how to file your Business Tax Return? Let H&R Block help you file your taxes.
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