TDS (tax deducted at source) on rent is defined under the legal provisions of Section 194-I. This is majorly for those people who are earning income from renting or sub-letting their properties. The rent received on any property will be subject to TDS since this is an additional income that is earned by those in business or those who are salaried professionals.
Knowing more about Section 194-I
Section 194-I has the following provisions:
• Persons (not HUFs or individuals) with responsibility for the payment of rent will be liable to deduct the tax at source.
• The deduction limit for rent is Rs. 2,40,000 for FY2022-23 (it was Rs. 1,80,000 till FY2018-19).
• Those HUFs and individuals subject to tax audits also have a mandatory obligation to deduct taxes at source.
• TDS on rent should be deducted at the time of the income by way of rent being credited to the payee’s account or while making payment, through issuing a cheque/draft or in cash or by any other method, whichever comes earlier.
Conditions for TDS on Rent
Here are a few conditions that you should know more about:
• No surcharge is imposed on the TDS on rent. However, the exception is when the payment exceeds Rs. 1 crore or there is any foreign entity involved.
• The PAN number of the person getting rent or the landlord should be provided to the payee for the deduction. If it is not provided, then the TDS on rent will be deducted at 20% as per Section 206AA.
• The TDS on rent does not charge any additional higher education cess or education cess.
• The rate is otherwise 10% for the rent of land, building, furniture, or fitting.
• Section 194-I does not make it compulsory that the deduction should be done on a monthly basis.
• Hence, if the rent is credited every quarter, then the deduction should happen quarterly as well. If it is yearly, then the TDS deduction should also be done yearly.
• The payee may apply to the Assessing Officer in Form 13 for no or lower deductions of taxes at source. If the officer determines that his/her total income does not justify the deduction of TDS or merits a lower rate, then a certificate may be issued in the Form 15A to the payer.
• No tax is to be deducted if the rent paid/due does not cross Rs. 2.4 lakh in the financial year as mentioned.
• Deductions are not required if the rent is paid by a HUF/individual not carrying on any audited business.
• TDS should be deposited on/before seven days from the end of the month in which the deduction is made.
• For amounts paid/credited in March, it should b eon/before the 30th of April.
• Not deducting TDS if it is applicable means interest at 1% each month from the date when the tax is deductible till the one when the tax is actually deducted.
• Taxpayers deducting but not depositing TDS to the Government will pay interest per month at 1.5% from the date of deduction till the deposit date.
These are the key aspects pertaining to TDS on rent that you should know about, especially if you are earning rental income from property.
