TDS On Hotel Room Rent | Section -194-I

Overview

Corporates use portals for conducting events or making their executive stays. These stays for the hotel can be long-term and short-term. In which case there can be an implication to deduct TDS on the hotel room rent under Section 194-I of the Income Tax Act. In order to file the TDS return, a qualified Chartered Accountant is preferred, as they are experts in income tax and can guide you on how to comply with the tax provision. In this article, we will provide you with complete insights into the TDS hotel room rent.

What is hotel accommodation u/s Section 194-I?

What is Section 194-I TDS on Rent? Under Section 194-I, TDS on rent states that the tenant who gains the right to occupy the property in exchange for the rental payment is liable to deduct TDS. Before the payment is made to the landlord, it is important to deduct TDS from the payment that would be deposited to the central government.

Meaning of Rent u/s 194-I

Under Section 194-I, the rent means any payment by whatever name called under any lease, sublease, tenancy, or any other agreement or arrangement for the use of (either separately or together) any: land, building, (including factory and building), land appurtenant to a building, machinery, equipment, furniture, and fitting.

Applicability u/s 194-I for Hotel Room Rent

Section 194-I is applicable to the person (not being an individual and HUF) who pays rent amounts exceeding Rs. 2,40,000 per annum to a resident person (payee) and is liable to deduct tax at source.

Individuals or HUFs who are liable for tax audits are responsible to deduct tax at source under Section 194-I. HUF and Individual are covered under this section in case total sales, gross receipts, or turnover (for individual or HUF) exceed the threshold limit, which is mentioned as below:

Some important considerations on the applicability of Section 194-I for the hotel room rent:

• As per (Circular No. 715/1995) issued by CBDT, if hotel room rent is taken on a regular basis, it would be paid u/s 194-I and construed payment made for rent u/s 194-I.
• Where embarked rooms are let out for a specified period and at a specified rate, they would be considered hotel room rent and construed as payment made for rent u/s 194-I.
• In a case of legal obligation for a hotel to reserve certain designated rooms under an agreement, it would be considered hotel accommodation on a regular basis during the operation of the agreement and would be construed as payment made for rent u/s 194-I.
• However, if in a hotel industry there is availability of certain types of hotels, such as luxury hotels, budget hotels, boutique hotels, etc., at predetermined rates, it is not considered hotel room rent on a regular basis. Hence, this condition is viewed outside the purview of Section 194-I.

Rate of TDS u/s Section 194-I for Hotel Room Rent

Here are the rates and calculations for TDS on hotel room rent under Section 194-I:

Threshold limit u/s Section 194-I

According to Section 194-I, the hotel is considered under the category of building, which requires the TDS of @10% on the amount of rent that exceeds Rs. 2,40,000 per annum during the financial year.

Applicability of threshold limit in case of rent paid to co-owner

Where the share of each co-owner in the property is definite and ascertainable, the limit of Rs. 2,40,000 will be applicable to each co-owner separately.

Time Of Deduction u/s 194-I

TDS is deducted at the time of payment of hotel room rent in cash, check, cheque or by any other mode, or hotel rent is credited in the books of the hotel, whichever is earlier.

Time of Deposition

Here are the details given at the time of deposit of TDS on hotel room rent:

• If the amount is credited or paid in the month of March—on or before April 30, the amount that is TDS deducted from the payee must be deposited with the government.
• In any other case, on or before 7 days from the end of the month in which the deduction is made.

Exemption under TDS on rent

A deduction shall not be made on the following exemption made under Section 194-I:

• Individual and HUF: Section 194-I is not applicable for the individual or any Hindu Undivided Family (HUF) not carrying a business, which will be audited under Income Tax.
• The sum doesn’t exceed Rs 2,40,000. The amount credited or the aggregate amount paid as hotel room rent doesn’t exceed the threshold limit of Rs. 2,40,000 per annum.
• When hotel room rent is paid to paid NRI, in which case Section 195 is applicable.
• No TDS under this section is deducted in case there is no agreement to provide accommodation on a regular basis. Where an agreement is merely in the nature of a rate contract, it cannot be said to be accommodation ‘taken on a regular basis’, as there is no requirement of TDS under Section 194-I. The occupancy in such cases would be occasional or casual. Hotel accommodation is taken on an occasional and casual basis and is not required to deduct TDS under Section 194.
• No TDS on refundable deposits.

Penalties and Fines under TDS on Rent

Here are the penalties and fines under TDS on hotel room rent:

• TDS is not deducted: If a deductor has not deducted the TDS from the payment of the rent, then it charges interest of @1% per month till the date TDS is deducted.
• TDS is deducted but not deposited: If a deductor has deducted the TDS from the hotel rent but has not deposited the collected tax to the government, then it charges interest @1.5% from the date when tax is deducted to the date of deposition.

Why choose Bizfoc for TDS?

At Bizfoc, we specialize in providing you the best accounting services in filing your TDS for the purchase of property. Here are the reasons why we are known for our services to our clients on filing TDS:

• Assist in suggesting the right documents for TDS filing.
• Providing valuable insights on sections of TDS computations.
• Prescribe forms as per the necessity.
• Helps in accurate computations for TDS computations and returns.
• Tailored advice and guidelines for TDS filing.

In general, we assist the client to solve their queries and doubts regarding the documentation, procedures, and fees for filling out the form. Other than making your filing successful, we help you make a better decision by covering every aspect of what you actually need to get your TDS.

Conclusion

TDS on rent for hotel room rent is an important tax issue that is handled under Section 194-I. The TDS deduction is critical for upholding tax norms and standards outlined in the Income Tax Act. Filing TDS by an individual can be a time-consuming and exhausting process. To make submitting TDS easier, it is suggested that you seek the assistance of CA professionals and experts.

Frequently Asked Questions