What is defined as rent under Income Tax Act?
1. "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any of the follow:
a) land; or
b) building (including factory building); or
c) land appurtenant to a building (including factory building); or
d) machinery; or
e) plant; or
f) equipment; or
g) furniture; or
whether or not any or all of the above are owned by the payee TDS Deduct on Rent
Who is liable to deduct TDS for payment of rent?
i. Any person other than Individual or HUF paying rent is required to deduct tax at source.
ii. Individual or HUF liable for tax audit u/s 44AB are required to deduct TDS on rent.
iii. Individual or HUF paying rent to a resident which exceeds Rs 50000/- for a month or part of month in the entire year at the rate of 5%. (New section 194 IB).
What is rate at which TDS is to be deducted on rent paid?
S.no. Type of Rent Rate of TDS
1 Plant & Machinery 2%
2 Equipment 2%
3 Land or Building 10%
4 Factory Building (including land) 10%
5 Land appurtenant to Building 10%
6 Furniture & Fixtures 10%
7 Individual or HUF paying rent
exceeding Rs 50000/- per month
or part of the month 10%
Is there any exemption on Payment of TDS on rent?
1. TDS is not required to be deducted if rent paid to single payee in the entire year doesn’t exceedsRs 180000/-.
2. TDS shall not be deducted under this section where rent is paid to a business trust, being a real estate investment trust, in respect of any real estate asset, referred to in clause (23FCA) of section 10.
1. XYZ Pvt. Ltd took on rent a factory from Mr. A for Rs 500000/- pa and Equipments from Mr. B for Rs 200000/- pa. They also rented a Generator from Mr. Y for Rs 100000/- pa for operating factory electricity. What amount of TDS is to be deducted?
Ans.XYZ ltd is required to deduct TDS as follow:
Type of Rent Amount of RentParty Name TDS Amount Reason
Factory Rent 500000 Mr. A 50000 180000/-
Generator 100000 Mr. Y NIL 180000/-
Equipments 200000 Mr. X 4000 180000/-
Total TDS 54000
2. Mr. A rented a House property for rent at Rs 400000/- pa from Mr. B. What TDS amount is to be deducted? (Mr. A is not liable for Tax Audit u/s 44AB)
AnsTDS is not required to be deducted as individual or HUF is not
required to deduct TDS on rent if they are not liable for Tax Audit.
However, if in the above case if Mr. A is liable for Tax Audit u/s 44AB then he is required to deduct TDS on rent i.e. Rs 40000/- (400000*10%).
3. Mr. X rented a residential flat from Mr. A for Rs 70000/- p.m. Is Mr. X liable to deduct TDS on rent?
Ans Yes, Mr. X is liable to deduct TDS as per new section 194IB, inserted in Budget 2017, where Individual or HUF is required to deduct TDS at the rate of 5%, where rent exceeds Rs 50000/- for a month or part of the month.
Other Relevant Points:
1. TDS shall be deducted at the time of credit to the account of payee or at the time of payment of such rent in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier.
2. TDS on rent also covers Sub-letting of any land or building or equipment or plant & machinery or furniture & fittings.
3. Refundable Rental security is not covered under the preview of TDS as this is not considered to be the income of payer.
4. TDS is required to be deducted on advance rent paid. Also any such rent is credited to ‘suspense account’ or to any other account shall also be liable to deduct tax at source. know more TDS Return Service visit here:- https://taxgoal.in/category/services/tds-filing-registrar-of-companies-filingg-roc/