FAQ’s on TDS under section 194-I

1. Section 194-I of the Income Tax Act, 1961

• The person (other than individual and HUF) who is responsible for paying rent to residents is liable to deduct tax at source under section 194I of the Income Tax Act, 1961.

2. Who should deduct TDS under section 194-I?

The following persons should deduct TDS u/s 194I while paying rent to resident

• Any person not being an individual or HUF
• Individual or HUF whose turnover/gross receipts exceed 1 crore or 50 lakhs respectively during the FY immediately preceding the FY in which such income by way of rent is credited.

3. Should TDS be deducted under section 194-I while paying rent to non-resident?

• No, TDS should be deducted at 31.2% as per the finance act 2017 while making payment to non-residents.

4. What is the threshold limit for deduction of TDS under section 194-I?

• If the aggregate amount of rent paid or credited during the financial year does not exceed Rs. 2,40,000/-, tax need not be deducted.

5. What do you mean by rent under section 194-I of Income-tax Act?

Rent means any payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any

whether or not any or all of the above are owned by the payee.

6. What is the rate of tax to be deducted under section 194-I?

If the Rent paid is

• Towards rent for any plant or machinery – 2%
• Towards rent for any land, building, furniture or fittings – 10%

Note: if the deductee does not furnish PAN – TDS shall be deducted @ 20% irrespective of the type of rent.

7. What are the circumstances where TDS need not be deducted under section 194-I?

• The aggregate amount paid / payable during the financial Year does not exceed the threshold limit of Rs. 2,40,000.
• If the tenant is an individual or HUF who is not liable to tax audit as per section 44 AB.
• Where the rent is paid / payable to a Government agency.
• Where the income by way of rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real estate asset, referred to in clause (23FCA) of section 10, owned directly by such business trust
• Where the landlord had applied in Form 13 for non-deduction of TDS, where his taxable income including rent is below the taxable limit, and has obtained a certificate to that effect from the Assessing Officer.

8. Whether section 194-I is applicable to rent paid for the use of only a part or a portion of any land or building?

• Yes, the definition of the term “any land” or “any building” would include a part or a portion of such land or building.
• Therefore, TDS has to be deducted even if the rent is paid only in respect of a part or portion of such land or building.