TDS on Rent (Sec 194I) *AY 2023-24*

TDS on Rent u/s 194I (A.Y. 2023-24 F.Y. 2022-23): Rent here means any payment made to the owner of land, building, machinery and plant using it for your own purpose up to the time specified in the rent agreement, lease agreement or any other agreement or arrangement. In this article, we will discuss all detailed provisions for deducting tax (TDS) on rent under section 194I  in a very easy way. As you all know recent amendments made it very complicated for laymen. So you should read the complete article to know the step-by-step procedure for TDS on rent for A.Y. 2023-24 or F.Y. 2023-23. You can find here the detail about how to deduct TDS on rent, the time to deposit TDS, TDS returns, and due dates to file TDS returns on rent, TDS certificate and more.

Person Liable to Deduct TDS on Rent 

Who is responsible to deduct TDS on rent u/s 194I: Any person except Individual or HUF** responsible for paying rent is required to deduct tax at source (TDS) (A.Y. 2023-24 F.Y. 2022-23).

**Tax is deductible also by individuals/HUFS if his total sales, turnover or gross receipts from business or profession carried on by him exceed Rs. 1 crore in the case of business (or Rs. 50 lakh in the case of profession) during the financial year immediately preceding the financial year in which the income is to be credited or paid.

Exemption Limit & TDS Rates on Rent

TDS Rates on Rent ( A.Y. 2023-24 F.Y. 2022-23): Here is the table to check the exemption limit and TDS rates on rent under section 194I.

Asset	Exemption Limit	TDS Rates
Rend of Land & Building – 194I	Rs.2,40,000 (Rs. 1,80,000 up to 31st March 2019)	10% (Individuals) 10% (Others)(5% if rent exceeding Rs.50,000 monthly is paid by individual/HUF who are not liable for tax audit –Refer Section 194IB)
Rent of Plant & Machinery and Other Equipment – 194I	Rs.2,40,000(Rs. 1,80,000 up to 31st March 2019)	2% (Individuals) 2% (Others)

• No tax is deductible if the amount of rent credited/paid during the financial year does not exceed Rs.2,40,000 (Rs. 1,80,000 up to 31st March 2019).
• No surcharge, education cess or SHEC shall be added to the above rates. Hence, the tax will be deducted at the source at the basic rate.
• The rate of TDS will be 20% in all cases if PAN is not quoted by the deductee.
• If the recipient is a non-filer of income-tax return, tax is deductible at twice the applicable TDS rate or at the rate of 5% whichever is higher as per section 206AB

Service tax paid by the tenant does not include calculating TDS on rent. As service tax is not the income of the landlord. Therefore it has been decided that TDS under section 194-I would be required to make on the amount of rent paid/payable without the service tax.

See Circular No.1/2014, Dated 13-1-2014 (Clarification of service Tax inclusion to calculate TDS) 

Time of deduction of TDS on Rent

When does tax have to be deducted on rent (A.Y. 2023-24 F.Y. 2022-23): The persons who are responsible as given above will deduct tax on rent under section 194I  at the time of payment of credit whichever is earlier. 

• Where income is credited to any account, whether called suspense account or by any other name in the books of accounts of the person liable to pay such income, such crediting shall be deemed to be the credit of such income to the account of the payee.
• Where the due date of deposit of TDS falls between March 20, 2020, and June 29, 2020, and such amount is paid on or before 30th June 2020, then for the period of delay interest will be chargeable at the rate of 0.75% per month (or part thereof). However, no penalty shall be levied (or no prosecution shall be sanctioned) in respect of such payment for the period of delay. 

Time Limit to Deposit TDS on Rent

When to deposit TDS on Rent u/s 194I: As per rule 30 the time limit to deposit TDS deducted on rent for  A.Y. 2023-24 F.Y. 2022-23 is as follows:

Where tax is deducted by the office of the Government:

• On the same day where the tax is paid without production of an income-tax challan; and
• On or before seven days from the end of the month in which the deduction is made, where tax is paid accompanied by an income-tax challan.

In any other case,

• On or before the 30^th day of April, where the income or amount is credited or paid in the month of March; and
• In any case, on or before seven days from the end of the month in which the deduction is made.

Time Limit to Issue Form 16A 

What is the due date to Issue Form 16A for TDS on Rent: You have to furnish form 16A within 15 days from the due date of submitting the TDS return/statement. In other words certificate of TDS in Form, 16A is to be issued quarterly on or before 

• 15th August
• 15th November
• 15th February
• 15th June

TDS Returns/Statement on Rent

What are the due dates to submit the TDS return deducted on rent: The payer who deducts TDS on rent as per section 194I  shall submit the TDS return as per the schedule given below for  A.Y. 2023-24 F.Y. 2022-23.

In Form No. 26Q on or before

• 31st July (1st QTR.)
• 31st October (2nd QTR.)
• 31 January (3rd QTR.)
• 31st May (4th QTR.)

Annual tax statement under section 203AA

In Form No. 26AS to be prepared and delivered by the Principal Director General or Director-General of Income Tax (Systems) or a person authorized by him to the deductee by 31^st July following the financial year during which taxes were deducted or paid.

Can AO’s certificate for deduction at a lower rate or non-deduction be obtained? (Section 197):  Yes, if the application is made in Form No. 13. The appropriate certificate may be issued by Assessing Officer, if necessary. The certificate shall not be granted if the applicant does not provide his permanent account number.

Should I deduct TDS on gross payment excluding service tax?:  Yes, it is clear now by CBDT Circular No.4/2008. Dated 28.4.2008 that TDS under sections 194-I of Income-tax Act would be required to be made on the amount of rent paid/payable excluding the service tax.