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Tax Deduction At Source(TDS) On Rent Payments
Posted by Pradeep Sadanapalli | October 23, 2007 | 10,127 views
(14 votes, average: 3.57 out of 5)
Loading ...Rent means any payment, under a lease, sublease, tenancy or any other agreement or arrangement. It can be through any name. The amount should be paid for the use of any land or building (including factory), together with furniture, fittings and the land appurtenant to it. It is not necessary that the building should be owned by the payee.
Ashish Gupta explains conditions under which tax should be deducted from the rent paid.
Rental incomes are subject to tax deducted at source (TDS) under the Income Tax Act. This is to be done under Section 194I of the Income Tax Act. According to the Income Tax Act, any person, responsible for paying to a resident, any income by way of rent, should deduct income tax at the prescribed rates on the amount of the interest payable. This needs to be done at the time of credit of the amount to the account of the payee, or at the time of payment in cash or cheque, whichever is earlier. It is to be noted that this does not apply to payments of rent made by an individual or a Hindu Undivided Family. So, basically, this covers situations where the rent is being paid by corporates.
The rate of deduction of tax on rent is 15 percent if the payee is an individual or a Hindu Undivided Family. In other cases, the rate is 20 percent.
No tax deduction should be made where the amount credited or paid during a financial year does not exceed Rs 1.20 lakhs. In case there are a number of payees, each having a definite and ascertainable share in the property, then the limit of Rs 1.20 lakhs applies to each of the payees separately.
The basis of tax deduction at source is ‘Income by way of rent’. In case ground rent, municipal taxes etc. are borne by the tenant, then no tax is deductible from such sums paid. In case the tenant makes a nonrefundable deposit to the owner of the property, TDS needs to be deducted from the amount as this payment is akin to payment of rent for the use of the property. It represents consideration for use of land or building. In case the deposit is refundable to the tenant after the expiry of the lease, no TDS is required to be deducted. In case such a deposit carries interest, it is not subject to TDS on rent but is subject to TDS provisions related to TDS on interest.
Under the Act, the rent for any kind of building is subject to TDS. In case a building is let-out along with furniture and fittings, and rent is payable under two separate agreements - one for the building and the other for the furniture and fittings - the composite rent is subject to tax.
Even in case of sub-lease of a building, TDS is to be deducted. In case the rent is paid as an advance rent, it is subject to TDS too. It is immaterial whether the rent is paid for the whole building or for a part of it.
SOURCES:
Times Of India
2 Responses to “Tax Deduction At Source(TDS) On Rent Payments”
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April 1st, 2009 at 10:53 am
I need clarification on this:
i have taken on lease a house for Rs 10500/- per month rental. The lease agreement is between me and the owner.
the rent is paid directly by my office to the owner by cheque every month.
As per IT act, individuals cannot deduct TDS on rent paid. since, the lease agreement is between me and the owner and the office is only paying on behalf, no TDS should be deducted.
However, my office claims that since they are paying the rent, they will deduct TDS.
Kindly clarify.
May 15th, 2009 at 8:59 am
I am TDS Payer, I am paying Rent to my father.
Please tell me can i claime this for TDS Retuns and if yes then what document required to file TDS returns.