What is the Tax Deducted at Source on Rent Section 194I

What is the Tax Deducted at Source on Rent Section 194I


As per the Finance Act, 1994 the provisions of TDS on rent have been introduced w.e.f 1.6.1994. For the purpose of this section rent means any payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or factory building together with furniture, fixture, fittings and land appurtenant thereto. It will not be relevant whether the payee is the owner of the building or not?.

1. Payments Covered

Under this section the following payments are covered –

Rent on Plant, Machinery and Equipment

Rent on Land, Building or Furniture or fittings

2. Who should deduct

The following persons are liable to deduct TDS on the payments of aforesaid nature –

Company, Firm, LLP, AOP, BOI

Individual and HUF whose books are required to be audited U/s 44AB in the preceding financial year.

Note : U/s 44AB Individual and HUF are required to get their books audited if turnover exceeds Rs. 1 Crore in case of business and Rs. 25 Lakhs in case of profession.

3. Threshold Limit

In case 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/-

4. Time of Deduction

Tax should be deducted at the time of actual payment or credit to the account of the payee whichever is earlier. If fails to deduct interest @ 1% p.m or part of the month should be charged for the period of delay in deduction.

5. Rate of TDS :

Rent on Plant and Machinery - 2%

Rent on Land or Building or furniture or fittings - 10%

If payee not quoted his PAN, then the TDS @ 20% should be applied.

Some Useful FAQS

1. Is rent includes service charges ?

Service charges payable to business centers are also covered in the definition of Rent.

2. Where Building and Furniture let out by separate persons ?

then the payee is required to deduct tax under Sec. 194I only from the rent paid/credited for the hire of building.

3. Charges regarding cold storage facility

In the case of cold storage where milk, ice cream, vegetables, etc., are stored, the payment may be named as charges for use of plant and not for use of building. So Cold storage is to be treated as a plant and TDS @ 2% will be attracted.

4. Payments to hotels for holding seminars including lunch

Where hotels do not charge for use of premises but charge for catering/meal only, then provisions of Sec.194I would not apply. However, Sec.194C would apply for catering part.