194(I) of Income Tax Act, 1961

Section 194I: TDS on Rent
1. Who is required to deduct TDS u/s 194I?

Any person except the individual / HUF who pays an income which is called rent to another person needs to cut down the TDS u/s 194I. On the other hand, if the Individual / HUF audited under 44AB (a) and (b) then they must also cut down the TDS under u/s 194I.

2. Define Rent?

Rent is defined as the payment which has to be paid by a person if he or she has taken any of the given below in use-

Building (also factory building), Land, Plant, Machinery, Furniture, Equipment, Fittings

3. What is the rate of tax deduction u/s 194I?

Given below is the rate of the tax under 194I-

If any machine/plant/ equipment is used, then 2 %
If any land/building (also factory building) or both /furniture/fittings is used then 10%

4. What is the time of tax deduction u/s 194I?

The tax must be deducted before crediting the amount into the receiver’s account or the actual payment is done by cheque, cash, draft or any other modes.

5. TDS is not Required to be paid if;

The rent amount paid (at once or total in a fiscal year) to a receiver should not be more than Rs 1,80,000. From the F.Y 2019-20, the limit has become Rs 2,40,000
The amount paid as rent to a business trust i.e. a real estate investment trust mentioned u/s 10(23FCA)
#Some Special Points to Consider

If an amount is paid for using warehouse then the TDS u/s 194I must be charged.
If an amount is paid as security to the owner then the TDS u/s 194I will not be charged. But if that amount is considered as rent then the TDS u/s 194I will be charged.
Under the 194I, the TDS will be charged if the business centre is on rent.
TDS will be charged u/s 194I if the hotel is used on a daily basis i.e. in an agreement.

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TDS was applicable to individual and HUF if their accounts are liable to Audit in section 44AB in previous year. The Finance Act 2020, says All individuals & HUF will be liable to deduct TDS if, the turnover had cross Rs. 1 Crore in case of business and Rs. 50 Lakhs in case of profession in previous year. These amendments shall take effect from 1st April 2020.

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