Persons required to deducted Tax – Any person who is responsible for paying rent to a resident in excess of Rs. 1,80,000/- for a particular financial year is required to deduct tax under this section.
Tax is to be deducted at the time of credit of such rent to account of payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode,whichever is earlier.
TDS is deductible under this section for rent paid on account of lease, sub-lease, tenancy or any other arrangement. Rent includes rent on land, building, plant and machinery, equipments, furniture and fittings whether given separately or together.
TDS Rates
For the use of any plant or machinery and equipment – 2%
For the use of any land or building or furniture or fittings for all persons – 10%
In case the payment is to be made to a resident no surcharge or education cess will be payable.
It is to be noted here that if the PAN of the deductee is not available, the rate of TDS will be 20%.
If in the opinion of the assessee, his annual taxable income on which tds is to be deducted will be less than the minimum amount chargeable to tax or the actual tax payable will be less than the tax deducted, then he can make an application to the assessing officer for no TDS deduction or deduction of TDS at a lower rate under section 197.
Other important Points to be noted here are:
- No surcharge is applicable except where the payment of rent is to be made to a foreign company and the amount exceeds Rs. 1 crore.
- No education cess is to be levied on TDS on rent.
- If the receiver of rent does not furnish his PAN to the tenant then the tenant is required to deduct the TDS @ 20%.
- If in case the municipal taxes, ground rent etc are borne by the tenant, no tax would be deducted on such amount.
- If the property is co-owned by two or more landlords , limit of Rs. 1,80,000 will be calculated separately for each co-owner.
- While TDS is to be deducted on non-refundable deposits made to the landlord, serving as security deposit using the asset, there will be no tds on the security deposit which is refundable at the end of the tenancy period.
- Where the accommodation charges are paid to a hotel on regular basis it will be subject to TDS.
TDS is to be deducted on monthly, quarterly or half yearly
Section 194-I doesn’t specifically states that the tds is to be deducted on monthly basis, hence the tds is to be deducted in accordance with the payment of rent being made. If the payment of rent is made on monthly basis, quarterly basis, half yearly or yearly basis, the tds is to be deducted on monthly, quarterly, half yearly and yearly basis respectively.