TDS on Rent under Section 194I A Simple Guide
Paying rent? Then you must know about TDS on Rent under Section 194I. This section makes it mandatory for certain tenants to deduct tax before paying rent to the landlord. Let’s break this down clearly.
Who must deduct TDS on Rent?
Under Section 194I of the Income Tax Act, 1961:
- Who deducts:
- Any person (individual, company, firm, etc.) paying rent exceeding ₹2.4 lakh per year per landlord.
- Note: Individual/HUF not liable to tax audit need not deduct TDS except under Section 194IB (separate for individuals paying rent above ₹50,000/month).
- What is Rent:
- Payment under lease, sub-lease, tenancy or any other agreement for:
- Land
- Building (with or without furniture)
- Machinery
- Plant
- Equipment
- Furniture & fittings
- Payment under lease, sub-lease, tenancy or any other agreement for:
TDS Rates under Section 194I
| Type of Rent | TDS Rate |
|---|---|
| Land/Building/Furniture/Fittings | 10% |
| Machinery/Plant/Equipment | 2% |
- No surcharge/cess to be added.
- If PAN not provided by landlord: 20% TDS applies under Section 206AA.
When to deduct and deposit TDS on Rent
Time of Deduction:
- Deduct at the time of credit to landlord’s account or actual payment, whichever is earlier.
Deposit Due Date:
- For non-government deductors:
- By 7th of next month (except for March: by 30th April).
TDS Certificate (Form 16A):
- Issue to landlord quarterly within 15 days from due date of filing TDS return.
Key Legal Reference
- Section 194I, Income Tax Act, 1961
- CBDT Circular No. 715 dated 8.08.1995 – clarifies what constitutes rent.
- Section 206AA – Higher TDS if PAN not furnished.
How to File TDS on Rent
1️⃣ Deduct correct TDS rate based on type of asset.
2️⃣ Deposit using challan ITNS 281.
3️⃣ File TDS Return in Form 26Q quarterly.
4️⃣ Issue Form 16A to the landlord.
5️⃣ Report in landlord’s Form 26AS – helps avoid disputes.
Expert Tip: Avoid Common Mistake
Always check aggregate rent per landlord per year. If you pay rent to multiple landlords, calculate threshold separately. Also, get landlord’s correct PAN to avoid 20% TDS!
FAQs on TDS on Rent
Q1. What if I miss deducting TDS on Rent?
You may face interest (1%–1.5% per month) and penalty. Deduct and pay immediately to minimise penalty.
Q2. Do I need TAN to deduct TDS on Rent?
Yes, except for individuals under Section 194IB who can use PAN.
Q3. Can I claim refund if excess TDS is deducted?
The landlord can claim credit in their ITR and get a refund, if applicable.
Summary
TDS on Rent under Section 194I applies if annual rent exceeds ₹2.4 lakh. Tenants must deduct 2% or 10% TDS based on the asset type, deposit by the 7th of next month, file Form 26Q quarterly, and issue Form 16A to landlords.
Closing & CTA
Understanding TDS on Rent under Section 194I helps you stay compliant and avoid penalties. Need help with TDS filing or tax compliance? Talk to Efiletax experts today!