Detailed guide on TDS on Rent u/s 194 I with example.
Applicability : TDS on Rent is liable to be deducted by the person who making payment if the total amount to be paid during the year exceeds Rs. 1,80,000 p.a. per taxpayer. This limit of Rs. 1,80,000 is per taxpayer it means if suppose there are two co-owners of an asset, this limit of Rs. 1,80,000 would apply for each co-owner.
Rates : U/s 194I there are two different rates of deducting tax at source have been prescribed for different types of Assets under Act.
TDS on Rent of payment of Machinary/Plant/Equipment - @ 2%
TDS on Rent of payment of any other Asset - @ 10%
Exception to the Rule : No TDS on Rent is liable to be deducted if the payment is being made by an individual or HUF who is not required to get his Tax Audit done u/s 44AB.
TDS where Service Tax is present :
As per The Service tax rule Service Tax @ 12.36% is liable to be paid in addition to Rent if receiver of rent is attracted to Service Tax. e.g. If you are making payment of Rs. 30 Lakh to one person, you would be liable to pay Service Tax of Rs. 3,70,800 and hence total cash outflow from your side will be amounted to 33,70,800.
Before circular dated on 13th January 2014 there was a confusion regarding whether the Tax to be deducted should be computed on Rs. 30,00,000 or on Rs. 33,70,800. But such confusion is clarified by CBDT in such circular that TDS on Rent is to be deducted on the amount paid exclusive of Service Tax.
So, in our above example...
Rent 30,00,000
(Add) Service Tax @ 12.36 % 3,70,800
(Less) TDS on Rent @ 10% on amount excluding (3,00,000)
Service Tax
Refund of TDS Deducted :
TDS deducted on Rent can be claimed as credit at the time of filling return of Income tax return if Tax payable is lower than TDS deducted.
TDS on Advance Rent :
In case where advance rent is being paid by the tenant to the owner of property TDS on Advance rent is also liable to be deducted.
Applicability : TDS on Rent is liable to be deducted by the person who making payment if the total amount to be paid during the year exceeds Rs. 1,80,000 p.a. per taxpayer. This limit of Rs. 1,80,000 is per taxpayer it means if suppose there are two co-owners of an asset, this limit of Rs. 1,80,000 would apply for each co-owner.
Rates : U/s 194I there are two different rates of deducting tax at source have been prescribed for different types of Assets under Act.
TDS on Rent of payment of Machinary/Plant/Equipment - @ 2%
TDS on Rent of payment of any other Asset - @ 10%
Exception to the Rule : No TDS on Rent is liable to be deducted if the payment is being made by an individual or HUF who is not required to get his Tax Audit done u/s 44AB.
TDS where Service Tax is present :
As per The Service tax rule Service Tax @ 12.36% is liable to be paid in addition to Rent if receiver of rent is attracted to Service Tax. e.g. If you are making payment of Rs. 30 Lakh to one person, you would be liable to pay Service Tax of Rs. 3,70,800 and hence total cash outflow from your side will be amounted to 33,70,800.
Before circular dated on 13th January 2014 there was a confusion regarding whether the Tax to be deducted should be computed on Rs. 30,00,000 or on Rs. 33,70,800. But such confusion is clarified by CBDT in such circular that TDS on Rent is to be deducted on the amount paid exclusive of Service Tax.
So, in our above example...
Rent 30,00,000
(Add) Service Tax @ 12.36 % 3,70,800
(Less) TDS on Rent @ 10% on amount excluding (3,00,000)
Service Tax
Refund of TDS Deducted :
TDS deducted on Rent can be claimed as credit at the time of filling return of Income tax return if Tax payable is lower than TDS deducted.
TDS on Advance Rent :
In case where advance rent is being paid by the tenant to the owner of property TDS on Advance rent is also liable to be deducted.
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