Any person who is responsible for paying rent to a resident is require to deduct tax at source as per provisions of section 194I of income tax act 1961. Individual and HUF who are not covered under this section are required to deduct Tax deducted at source on rent if the total amount exceed Rs 50,000.
When Tax has to be deducted
The person responsible for paying rent should deduct tax at source either
a. At the time of credit of such income or
b. At the time of payment in cash or by issue of a cheque or bank draft or any other mode specified
Whichever is earlier.
Where any income by way of rent is credited to any account in the books of account of any person liable to pay such rent then suchcrediting shall be deemed to be the income to the account of the payee. No tax shall be deductable if the payment during financial year does not exceed Rs 1,80,000.
What is Meaning of Rent
As per section 194I of income tax act 1961, rent means any payment received under any agreement like leasing, tenancy, sub leasing etc., for the use of
Whether or not owned by payee or not.
1. Building Let out along with the furniture : If building is let out along with furniture/fittings but rent is payable under two separate agreements then the composite rent will be considered for deduction under section 194 I
2. Advance Rent: Any advance rent paid is subject to tax deduction at the time of payment.
3. Non refundable deposit: In case where tenant make a non refundable deposit tax shall be deducted at source
4. Warehousing charges: The term rent include any payment received under an agreement, leasing, sub leasing. Hence any payment made as warehousing charges shall be treated as rent and tax is deducted at source.
5. Rent of a part of building: Even if part or portion of building given on rent section 194I will be applicable and will liable to deduct tax at source.
6. Payment made to cold storage owners: The main function of cold storage is to preserve the perishable goods and storage of such goods is only incidental in nature. The main reason for opting cold storage is to maintain or store goods at particular temperature. Therefore section 194I will not be applicable for charges paid to owner as the arrangement between customer and cold storage owner is in contractual in nature for maintaining goods at given temperature. For these types of payments tax has to be deducted under section 194C of income tax act.
Rate of TDS
Tax is deductable at source under section 194I of income tax act 1961 at the rates given below
1. For use of Machinery or plant or equipment 2%
2. For use of land, building, furniture and fittings 10%
Circumstances under which TDS u/s 194I not applicable
1. Amount not exceeding Rs 1,80,000 during the financial year and not exceeding Rs 50,000 in case of individual and HUF.
2. Where payee is a government or local authority.
Time limit for depositing TDS
1. In case of Government: On the same day
2. In case of other than government: On or before 7 days from the end of the month in which deduction is made.