Section 194-I: TDS on Rent for Corporates

Overview

Under 194-I, TDS on rent is tax deducted at source from the rental payment, which is ultimately deposited with the government. The prime objective of getting this TDS certificate for rent is to simplify the procedures of tax payments made to the government. It is recommended to approach a chartered accountant to help you with filing a TDS return and obtain a TDS certificate. In this article, we will provide you with complete insights into how to proceed with the TDS on rent for machinery.

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 under Section 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 and rate of TDS on rent u/s 194-I

1. Any person other than an individual or HUF which is covered under Section 194-IB
2. Individuals and HUF are required to deduct TDS if turnover in the previous financial year is greater than 1 crore in the case of business or gross receipts is greater than 50 lakhs in case of profession. This means Individuals or HUF who are liable for tax audit are responsible to deduct tax at source under Section 194I.

Nature of Payment	TDS Rate
Rent of plant & machinery, equipment	2%
Rent of land and building, furniture	10%

Important points:

• Advance rent shall also be subject to TDS under this section in the year of payment.
• Warehousing charges shall also be subject to TDS under this section.
• It is not necessary that payee must be the owner of above mentioned assets.
• Passenger service fees (PSF) paid by Airline’s Company to Airport Operator is not treated as rent so TDS is not applicable u/s 194-I {Circular No. 21/2017}.

Threshold limit for TDS on Rent

No deduction shall be made for TDS on rent when it is up to Rs. 2,40,000 per annum. TDS will be deducted when rental or lease payments exceed the given threshold.

Time for Deduction & Deposit TDS On Rent

Time to deduct TDS: The TDS on rent should be deducted at source at the time of payment or credit of rental or lease income in the books of the receiver. The payment of rental or lease income can be through cash or cheque.

Time to deposit TDS: The timing of depositing TDS varies with who has taken assets on rent.

Exemptions of TDS on rent u/s 194-I

• No TDS if rent amount is up to ₹ 2,40,000 per annum to a person in the financial year.
• No TDS on refundable deposits. However, “non-refundable deposits” shall attract TDS under this section.
• There is no requirement to deduct TDS from income by way of rent if the recipient is the government.
• Cooling charges paid by the customer to the owners of cold storage plants cannot be treated as rent. Hence, TDS should not be deducted u/s 194-I but should be deducted u/s 194-C (contractor payments).
• Rent paid on agricultural land.
• Rent paid by individuals or HUF on immovable property is covered under Section 194-IB.

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 is a crucial tax implication, which is done under Section 194-I. The TDS deduction is crucial for maintaining the tax regulations and standards under the Income Tax Act. Filing TDS by an individual himself can be a cumbersome and tiring process to file the TDS return for the purchase of property by NRI. So, it is advisable to get the TDS filed with the help of CA professionals and experts to get ease in filing TDS.

Frequently Asked Questions (FAQs)