Definition of Rent – Section 194I
TDS on rent will be deducted under section 194I only if it has been paid or payable under a lease, sub lease, tenancy or any other agreement or arrangement for the use of following assets:
Who is responsible for deduction of tax?
· Any person responsible for making payment of rent to a resident is required to deduct tax at source under section 194I.
· However, an individual or an HUF whose books of account are NOT required to be audited u/s 44AB during immediately preceding financial year (FY) is not required to deduct tax at source u/s 194I.
TDS on Rent under section 194I of Income Tax Act, 1961
Nature of Payment
Rent of Plant, Machinery or Equipment
Rent of land, building or furniture or fitting
*TDS on rent will be deducted even if such assets are not owned by the person.
TDS on rent has to be deducted exclusive of Service Tax
CBDT in circular No:4/2008 has clarified that TDS on rent has only to be deducted on amount of rent and not on services tax on rent.
No TDS on rent or TDS at a lower rate
If the owner’s income is not taxable as per the current provisions of income tax act 1961 then such person can apply to the assessing officer for lower deduction or Nil deduction of TDS on rent.
TDS on rent paid in advance
In case where rent has been paid in advance to the landlord or owner, TDS on such rent has also to be deducted at the time of making payment. In such cases if advance rent paid for more than one financial year then it has to be allowed in proportion in which such income is offered for tax
If security deposit paid in advance is non-refundable then TDS on such amount has to be deducted while making payment as its part of the consideration paid towards rent.
It’s the responsibility of the owner to intimate their PAN to deductor, In absence of PAN TDS on rent has to be deducted @20% instead of the normal rate as applicable under section 194I.
The following is a overview of TDS on Rent which is required to be deducted by Professionals and Business categories of Taxpayers:
Category: Professionals and Business falling under scope of Section 44AB