TDS on Rent is a tax deducted at source on rent payments made to an individual or a non-corporate entity as per the TDS on rent section of the Income Tax Act, 1961. If the annual rent paid exceeds the TDS on rent limit of Rs. 2,40,000, then TDS is applicable on the rent payment. The TDS rate on rent is 10% for individuals and non-corporate entities, although there are provisions for lower TDS rates in certain cases. In this article, we will discuss the TDS on rent limit, the TDS on rent payment process, and the TDS rate on rent.
TDS on Rent Limit
The TDS on rent limit is applicable for both residential and commercial properties. If the annual rent paid by an individual or a non-corporate entity exceeds Rs. 2,40,000, then TDS is applicable on the rent payment. If the annual rent is less than Rs. 2,40,000, then TDS is not applicable on the rent payment.
TDS on Rent Payment Process
The TDS on rent payment process is as follows:
The tenant calculates the TDS on rent based on the annual rent and the applicable TDS rate, deducts the TDS on rent at the time of making the rent payment, and deposits the TDS with the government using the TDS payment challan, Form 26QC. The tenant is also required to furnish a TDS certificate, Form 16C, to the landlord as a proof of TDS deduction and payment.
The landlord is then required to include the rent income in the tax return and claim credit for the TDS on rent. It is important to note that TDS on rent is applicable only on the rent paid to an individual or a non-corporate entity and not on rent paid to a corporate entity. If the landlord is a corporate entity, then TDS is not applicable on the rent payment. The TDS rate on rent is also lower for senior citizens (above the age of 60 years) at 5% and nil for very senior citizens (above the age of 80 years).
TDS on Rent Rate
TDS on Rent is a tax deducted at source on rent payments made to an individual or a non-corporate entity as per the TDS on rent section of the Income Tax Act, 1961.
The rates of TDS can be summed up as follows:
- Rent for plant/ equipment/ machinery- 2% TDS on the rent amount paid
- Rent for land/ building/ furniture/ fittings- 10% TDS on the rent amount paid
- Individual/ HUF not liable to tax audit – 5% TDS on the rent paid in cases where more than 50,000 is paid per month as rent.
TDS on Rent Calculation
In India, TDS on rent is governed by section 194-I of the Income Tax Act, 1961. As per this section, if the annual rent paid by an individual or a non-corporate entity exceeds Rs. 2,40,000, then TDS is applicable on the rent payment at the rate of 10%. This means that the tenant is required to deduct TDS at the rate of 10% on the rent payment and deposit it with the government using the TDS payment challan, Form 26QC.
For example, if the annual rent paid by an individual is Rs. 3,00,000, then the TDS on rent will be calculated as follows:
TDS on rent = Annual rent x TDS rate = 3,00,000 x 10% = Rs. 30,000.
The tenant is then required to deduct this TDS on rent at the time of making the rent payment and deposit it with the government using the TDS payment challan, Form 26QC. The tenant is also required to furnish a TDS certificate, Form 16C, to the landlord as a proof of TDS deduction and payment. The landlord is then required to include the rent income in the tax return and claim credit for the TDS on rent.
Exemption Limit for TDS on Rent
It is important to note that TDS on rent is applicable only on the rent paid to an individual or a non-corporate entity and not on rent paid to a corporate entity. If the landlord is a corporate entity, then TDS is not applicable on the rent payment.
- As per Section 194IB, if rent paid is less than 50,000 per month, then individuals and HUFs are not covered under tax audits are not liable to deduct tax
- As per Section 194I, if rent paid in a financial year is less than 2,40,000, then persons other than those mentioned above are not liable to deduct tax (TDS)
TDS on Rent: FAQs
As per section 194-I of the Income Tax Act, the rent payer needs to deduct a 10% TDS on any building or land made to the landlord.
If the annual rent payable exceeds ₹2,40,000 per year, individual is required to pay TDS on Rent.
If TDS is deducted late, a penalty at the rate of 1 per cent simple interest per month is levied till the date when TDS is finally deducted and paid to the government.
