Rent means any payment made to 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 detail provisions for deducting tax (TDS) from rent 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.
Person Liable to Deduct TDS on Rent
- Payer (if company) except individual and HUF who were not covered u/s 44AB(a) or 44AB(b) in the preceding previous year.
- Individuals and HUF who are subject to tax audit
Exemption Limit & TDS Rates on Rent
|Rend of Land & Building – 194I||1,80,000 p.a./ 2,40,000 p.a. (for F.Y.2019-20 – After Budget 2019-20)||10% (Individuals)|
10% (Others)(5% if rent exceeding Rs.50,000 monthly is paid by individual/HUF who are not liable for tax audit)
|Rent of Plant & Machinery and Other Equipment – 194I||1,80,000 p.a./ 2,40,000 p.a. (for F.Y.2019-20 – After Budget 2019-20)||2% (Individuals)|
- No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
- The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.
Service tax paid by the tenant does not include to calculate TDS on rent. As service tax is not the income of landlord. Therefore it has been decided that TDS under section 194-I would be required to made on the amount of rent paid/payable without the service tax.
Time of deduction of TDS on Rent
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 credit of such income to the account of the payee.
Time limit for deposit of TDS on Rent
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 30th 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 for issue of certificate Form 16A
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
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 31st July following the financial year during which taxes were deducted or paid.
Can AO’s certificate for deduction at lower rate or non-deduction be obtained? (Section 197): Yes, if application is made in Form No. 13. Appropriate certificate may be issued by Assessing Officer, if necessary. Certificate shall not be granted if the applicant 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.