Many people in India generate a lot of income from rent by renting out their property, machinery, or furniture. Apart from this, the main source of income for many people is rental income.But, do you know that in the Income Tax Act 1961, the payment of rent has also been included in the purview of TDS. That is, if you pay rent to someone, then first you have to deduct TDS on it and you will have to pay the balance amount as rent.
However, you will have to deduct TDS on payment of rent only in case the rent payment exceeds a prescribed limit. Hence, you will not need to deduct TDS from all the rent payments.
When you have to deduct TDS on payment of any kind of rent and when TDS will not be deducted, you should be aware of all these, so that you do not pay interest and penalty for not complying with the provisions of the Income Tax Act 1961. Fallen.
In today's article (TDS on rent), we will discuss the important rules related to deducting TDS on payment of rent under the Income Tax Act,
- What are the conditions to be fulfilled for deducting TDS on payment of rent? (tds on rent )
- At what rate will TDS be deducted on payment of rent?
- At what time will TDS be deducted?
- What will be the method of deducting TDS?
- What is section 194IB and when is TDS deducted in it?
- What is TDS Refund Procedure?
Conditions For Deduct Tds on Rent ?
The rules related to the deduction of TDS on rent have been given in section 194I and section 194IB of the Income Tax Act 1961. However, both these sections are applicable to different persons.So, first of all, you have to see that if you are required to deduct TDS, then in which section TDS will be deducted by you.
Section 194I of the Income Tax Act 1961 lays down all the provisions of Tds on Rent, this section is applicable to all persons except individuals and HUFs whose turnover is less than a specified limit. We will discuss this limit further.
That is, if you are an individual and your turnover is less than the prescribed limit, then you will not have to deduct TDS in section 194I. But if you are a company, firm, or LLP then you have to deduct TDS in this section.
According to section 194I, if any person pays rent to any other person (who is a resident) , then that person is liable to deduct TDS on fulfillment of certain conditions.
In order to deduct TDS on rent in this section, all these conditions must be fulfilled
Section 194-I is applicable only on payment of rent to a resident of India, if you pay rent to an NRI, it will not come under this section;
Any person shall be liable to deduct TDS on payment of rent, but shall not include individuals and HUFs whose turnover is less than a specified limit;
In a financial year Rs. 2,40,000 (earlier 1,80,000) plus rent to be paid.
That is, TDS will be deducted by you in this section only when you have paid more than 2 lakh 40 thousand rent in a year. The limit of 2 lakh 40 thousand is applicable on the payment made to a person.
If you pay more than 2,40,000 rent in a year to a different person but do not pay rent more than 2,40,000 to any single person, then in this case you will not have to deduct TDS.
In a financial year Rs. 2,40,000 (earlier 1,80,000) plus rent to be paid.
That is, TDS will be deducted by you in this section only when you have paid more than 2 lakh 40 thousand rent in a year. The limit of 2 lakh 40 thousand is applicable on the payment made to a person.
If you pay more than 2,40,000 rent in a year to a different person but do not pay rent more than 2,40,000 to any single person, then in this case you will not have to deduct TDS.
Further, if you have entered into two or more rent agreements but no single rent agreement exceeds 2 lakh 40 thousand, So in this case, the total payment made by you will be seen in calculating the limit of Rs.2 lakh 40 thousand.
That is, if the total payment of all the rent agreements made by you in a year is Rs. 2 lakh 40 thousand then you are liable to deduct TDS on all payments. This means that the limit will be calculated person-wise and not rent agreement-wise.
Apart from this, if there is more than one owner of a property and their share is definite and identifiable, then Rs. The limit of 2 lakh 40 thousand will be applicable for all the owners separately.
Apart from this, if you pay some rent as an advance or deposit some amount as a fixed deposit (non-refundable), then TDS will also be deducted from it. Because advance rent and non-refundable deposits are also considered as part of the rent.
Note –
According to the interim budget presented on February 1, 2019, no TDS will have to be deducted on the payment of rent less than Rs 2,40,000 (which was earlier 1 lakh 80 thousand) in a financial year. Also what is TDS lying and how to calculate TDS on salary.
That is, if the total payment of all the rent agreements made by you in a year is Rs. 2 lakh 40 thousand then you are liable to deduct TDS on all payments. This means that the limit will be calculated person-wise and not rent agreement-wise.
Apart from this, if there is more than one owner of a property and their share is definite and identifiable, then Rs. The limit of 2 lakh 40 thousand will be applicable for all the owners separately.
Apart from this, if you pay some rent as an advance or deposit some amount as a fixed deposit (non-refundable), then TDS will also be deducted from it. Because advance rent and non-refundable deposits are also considered as part of the rent.
Note –
According to the interim budget presented on February 1, 2019, no TDS will have to be deducted on the payment of rent less than Rs 2,40,000 (which was earlier 1 lakh 80 thousand) in a financial year. Also what is TDS lying and how to calculate TDS on salary.
Under Section 194I, at what rate and which property is rented, TDS will be deducted? (Rate & Assets)?
Different rates have been given for different assets to deduct TDS on the payment of rent. As if -
That is, in this section all the salaried persons and business persons (whose turnover is less than the prescribed limit) have been included.
To deduct TDS in section 194 IB, it is necessary that the individual and HUF pay Rs. 50,000 plus rent to be paid.
If less than 50 thousand monthly rent is paid by you, then you will not have to deduct TDS. Also if you TDs in this section bite you then liable for the TAN number will not be mandatory.
Plant & Machinery – 2%
Land, Building, Furniture & Fittings – 10%
Note- Education & Secondary Higher Education Cess will not be levied on these rates.
For example, suppose you are an individual and you have a tax audit. And you have taken a house on rent for which you can pay Rs. 3,00,000 then you pay Rs. 3,00,000 TDS will be deducted at the rate of 10% i.e. Rs. 30,000 (Rs. 3,00,000 * 10 %).
Also, read Complete information about House Rent Allowances Exemption & Section 80 GG
This means that if you are paying monthly rent then you will have to deduct TDS monthly even if you are crediting your accounts quarterly.
Apart from this, if Landlord gives the wrong PAN number, then it will be considered that the PAN number has not been given and TDS will be deducted by you at the rate of 20%.
If the income of the landlord is not taxable, then he can file a self-declaration (Form 15G/15H) so that TDS will not be deducted by the payer on the rent.
But self-declaration cannot be given by any company or firm. TDS will always be deducted if the rent is being paid to a company or firm and the conditions for deduction of TDS are fulfilled. Also, read Income Tax kya Hai Aur Income Tax Ki Rates.
However, in section 194IB, TDS will be deducted only by those individuals and HUF whose turnover is less than the prescribed limit.
Land, Building, Furniture & Fittings – 10%
Note- Education & Secondary Higher Education Cess will not be levied on these rates.
For example, suppose you are an individual and you have a tax audit. And you have taken a house on rent for which you can pay Rs. 3,00,000 then you pay Rs. 3,00,000 TDS will be deducted at the rate of 10% i.e. Rs. 30,000 (Rs. 3,00,000 * 10 %).
Also, read Complete information about House Rent Allowances Exemption & Section 80 GG
Time of TDS Deduction on Rent – At what time TDS will be deducted on payment of rent?
If you are liable to deduct TDS then you will have to deduct TDS at the time of crediting the amount of rent to the account of the payee or payment of rent whether by cash or by the issue of check or draft or by any other mode, whichever is earlier.This means that if you are paying monthly rent then you will have to deduct TDS monthly even if you are crediting your accounts quarterly.
How to deduct TDS on rent?
If TDS is being deducted by you, then first you have to take the PAN number of the Landlord. If the Landlord does not have a PAN number or does not give it, then TDS will have to be deducted at the rate of 20% instead of deducting TDS at the rate mentioned in section 194I.Apart from this, if Landlord gives the wrong PAN number, then it will be considered that the PAN number has not been given and TDS will be deducted by you at the rate of 20%.
If the income of the landlord is not taxable, then he can file a self-declaration (Form 15G/15H) so that TDS will not be deducted by the payer on the rent.
But self-declaration cannot be given by any company or firm. TDS will always be deducted if the rent is being paid to a company or firm and the conditions for deduction of TDS are fulfilled. Also, read Income Tax kya Hai Aur Income Tax Ki Rates.
Section 194 IB
A new section 194IB was added in the Income Tax Act 1961 with effect from 1st June 2017. In this section also, the rules related to deducting TDS on rent have been explained.However, in section 194IB, TDS will be deducted only by those individuals and HUF whose turnover is less than the prescribed limit.
Turnover Limit
- 1 crore in the business case,
- 50 lakh in case of profession
That is, in this section all the salaried persons and business persons (whose turnover is less than the prescribed limit) have been included.
To deduct TDS in section 194 IB, it is necessary that the individual and HUF pay Rs. 50,000 plus rent to be paid.
If less than 50 thousand monthly rent is paid by you, then you will not have to deduct TDS. Also if you TDs in this section bite you then liable for the TAN number will not be mandatory.
Time of TDS Deduction Under Section 194 IB – Time limit for deducting TDS in Section 194IB
TDS is not required to be deducted under this section every month or whenever the rent is paid. In this, the 2-time limit has been given to deduct TDS, whichever is earlier, you will have to deduct TDS, at the end of March or At the end of the month ending in the rent agreement, if not hired for the whole year. Know what is GST and the answers to the questions related to it
In the income tax return, the landlord will have to show the amount of refund payable to which the refund is transferred to the bank account of the landlord after the income tax department processes the return in section 143(1). If you liked the article TDS on Rent, then definitely share it.
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TDS Refund Process ?
If the income of the landlord is not taxable or more TDS has been deducted, then the refund can be claimed by the landlord by filing the income tax return.In the income tax return, the landlord will have to show the amount of refund payable to which the refund is transferred to the bank account of the landlord after the income tax department processes the return in section 143(1). If you liked the article TDS on Rent, then definitely share it.
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