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Sec 194I:- TDS on Payment made for Rent to Resident Person for use of Land, Building, Plant and Machinery and Furniture 

Any person other than Individual or Hindu Undivided Family (HUF) and Individual or Hindu Undivided Family (HUF) whose Gross Receipts or Sales or Turnover exceeding the Monetary Limit prescribed under sec 44AB of Income Tax Act shall required to deduct TDS on Payment made to resident for Rent under any Lease, Sub- Lease, tenancy or any other agreement or arrangement for use of Land or Building or Land appurtenant to a building or Plant or Machinery or Furniture and Fittings etc.

 

Rate of TDS: -    

Rate of TDS on Rent for Use of Plant or Machinery or Equipment is 2% on Rent Paid (Excluding Service Tax or Goods and Service Tax etc.)

Rate of TDS on Rent for Use of Land or Building or Furniture is 10% on Rent Paid (Excluding Service Tax or Goods and Service Tax etc.)

 

Time of Deduction of TDS: - 

TDS should be deducted at time of Rent Paid or Rent Credited to Receiver whichever is earlier.

 

Exceptional Case where TDS is not required to TDS: -

Where single or aggregate Payment made during the financial year for Rent Use of Plant or Machinery or Equipment or Land or Building or Furniture does not exceed Rs. 180000.

Where Rent Paid or Credited to a Real Estate Investment Trust (REIT) referred under sec 10 (23FCA) of Income Tax Act. 

 

Sec 194IB: - TDS on Payment made for Rent to Resident Person

Any Individual or Hindu Undivided Family (HUF) whose Gross Receipts or Sales or Turnover not exceeding the Monetary Limit prescribed under sec 44AB of Income Tax Act shall require to Deduct TDS for Rent Paid to Resident Person exceeding Rs. 50000 per month. 

 

Rate of TDS: -    

Rate of TDS is 5% of Rent Paid or Credit (Excluding Service Tax or Goods and Service Tax etc.)

 

Time of Deduction of TDS: - 

TDS should be deducted at time of Rent Paid or Rent Credited to Receiver whichever is earlier.

 

Exceptional Case where TDS is not required to TDS: -

Where Payment made or credited to Resident Person not exceeding Rs. 50000 per Month.

 

Note: - Any Individual or Hindu Undivided Family (HUF) who are required to Deduct TDS under sec 194IB on Rent Paid is not required to Obtain TAN (Tax Deduction Account Number) and not required to file Quarterly Return in Form 26Q.

 

Sec 195: - TDS on any Payment Made to Non – Resident which Chargeable to Income Tax under Income Tax Act other than  Interest Referred under sec 194LB, 194LC and 194LD, Income Chargeable under Head Income from Salary and Dividend Referred under Sec 115 O

Any Person including Individual or Hindu Undivided Family (HUF) whose Gross Receipts or Sales or Turnover exceeding or not exceeding the Monetary Limit prescribed under sec 44AB of Income Tax Act shall required to deduct TDS on any Payment made to Non – resident which Chargeable to Income Tax under Income Tax Act (Including Payment made for Rent) other than: - 

Payment of Interest from Infrastructure Debt Bond (TDS on which required to Deducted under sec 195LB)

Payment of Interest from Indian Company (TDS on which required to Deducted under sec 195LC)

 Payment of Dividend from Domestic Company.    

 

Rate of TDS: -    

Rate of TDS is 30.90% ( 31.20% from Financial Year 2018 - 19 {Assmenemt Year 2019-20} onwards) of Rent Paid or Credit (Excluding Service Tax or Goods and Service Tax etc.)

 

Time of Deduction of TDS: - 

TDS should be deducted at time of Rent Paid or Rent Credited to Receiver whichever is earlier.

 

Compliance Requirements for TDS Deducted on Rent Payment under sec 194I, Sec 194IB and Sec 195 of Income Tax Act  

 

Sec 206AA: - Requirement to Furnish PAN of Deductor

Any deductee who is entitled to get credited or receive any sum on which TDS required to be deducted  shall furnish his PAN to Person who is making Payment and Deducting TDS otherwise TDS shall be deducted higher of Rate Prescribed in the Income Tax  Act and 20% .

 

Consequences of Failure to Deduct or Pay

 

Tax Demand: - As per Sec 201(1) of Income Tax Act if any person liable to deduct fails to deduct TDS on Rent Paid shall liable to pay Tax Demand equal to tax amount deductable but not deducted.

 

Interest: - As Per Sec 201(1A) of Income Tax Act if any person liable to Deduct TDS fails to Deduct TDS on Rent Paid shall be liable to Pay Interest at the Rate of 1% per month or part of month on TD amount Deductable but not deducted. If any Person liable to Deduct TDS fails to Deposit TDS Deducted on Rent Paid shall liable pay Interest at the Rate of 1.5% per Month or Part of Month on TDS amount required to be deposited to Government.

 

Penalty for Not Filling TDS Return: - As per Section 234E of Income Tax Act Any Person who is liable to Deduct TDS and liable to file TDS Return fails to file TDS Return on Time shall liable to Pay Penalty of Rs. 200 per day subject to Maximum amount of Penalty wouldn't exceed TDS Amount.

 

Grossing of Rent Paid or Credited: -

Any Person who is liable to Deduct TDS on Rent paid or Credited for use of Land and Building, Plant and Machinery ect  fails to Deduct and make payment of full amount of rent with Deduction of TDS, in such a case Payer shall be liable to Pay TDS on Rent by Grossing Up Rent paid and Deposit TDS to Government on prescribed time at appropriate Rate.

 

For Example: - XYZ Pvt Ltd paid Rent to Mr. A at the Rate of Rs. 22500 per month for use of  Buildinga but fails to Deduct TDS on Rent Paid. In this Case Mr. A is liable to Deposit TDS  on Rent by Grossing Up of Rent Paid, i.e. Rs. 22500\12 at the Rate of 10% . 

 

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