Tax Deducted at Source on rent is an important aspect of the Indian taxation system. It ensures that tax is collected at the source of income, helping the government to collect taxes in advance and reduce tax evasion. This post will cover the key aspects of TDS on rent, including the TDS limit, TDS under Section 194IB, and TDS rates.
TDS on Rent Limit
The TDS on rent limit varies based on the type of payer and the amount of rent paid. Here are the key points:
- Section 194I: This section applies to individuals and Hindu Undivided Families (HUFs) who are subject to tax audit. The TDS threshold for deduction of tax on rent is ₹2,40,000 per annum. If the annual rent exceeds this limit, TDS must be deducted.
- Section 194IB: This section applies to individuals and HUFs who are not subject to tax audit. If the monthly rent exceeds ₹50,000, TDS must be deducted under this section.
TDS on Rent under Section 194IB
Section 194IB was introduced to widen the tax base and ensure that more rent payers are covered under TDS provisions. Here are the key points:
- Applicability: This section applies to individuals and HUFs who pay rent exceeding ₹50,000 per month to a resident Indian. These individuals or HUFs should not be liable for tax audits.
- Rate of TDS: The TDS rate under Section 194IB is 5% of the rent if the landlord provides a PAN number. If the landlord does not provide a PAN, the TDS rate is 20%, but it cannot exceed the rent amount for the last month of the previous year or tenancy.
- When to Deduct TDS: Deduct TDS when you credit the rent for the last month of the previous year or the last month of tenancy, whichever comes first. You can also deduct it when you make the payment in cash, cheque, or any other mode.
TDS on Rent Rates
The TDS rates on rent vary based on the type of payment and the recipient’s status. Here are the key points:
- Section 194I: The TDS rate is 10% for the use of any land or building (including factory buildings) or furniture or fittings. For the use of any machinery or plant or equipment, the TDS rate is 2%.
- Section 194IB: As mentioned earlier, the TDS rate is 5% if the landlord provides a PAN number and 20% if the landlord does not provide a PAN, subject to certain conditions.
Tax Deducted at Source Payment: Avoid Consequences in 2025
Conclusion
Understanding tax deducted at source on rent is crucial for both landlords and tenants to ensure compliance with tax laws and avoid penalties. By knowing the TDS limits, rates, and provisions under different sections, you can manage your tax obligations effectively.
