TDS (section 194I) requires certain entities making specified payments to third parties to deduct tax at source from these payments. These deducted amounts must be deposited with the government. TDS is applicable to different types of income above certain limits and is deducted based on income tax slabs for salaried individuals. Section 194I specifically requires those responsible for paying rent (not individuals or HUFs) to deduct tax at 2% for plant/machinery rent or 10% for other rents, unless the annual rent amount is below Rs. 2.4 lakh. The document further explains circumstances where TDS on rent is not required and provisions for TDS on property sale (Section 194IA), rent by some

1. TDS
(section 194I)
BY- MANISHA
RIJHWANI

2. TDS
(section 192-196)
Entities (both corporate and non-
corporate deductors) making
payments (specified under Income
Tax Act) to third parties (deductees)
are required to deduct tax at source
(Tax Deducted at Source -TDS) from
these payments and deposit the
same at any of the designated
branches of banks authorized to
collect taxes on behalf of
Government of India. They should
also furnish TDS returns containing
details of deductee(s) and challan
details relating to deposit of tax to
ITD.

3. • A person (deductor) who is liable to make payment of
specified nature to any other person (detuctee) shall deduct
tax at source and remit the same into the account of the
central government.
• TDS is applicable to each type of income beyond a certain
limit.
TDS is deducted as per the income tax slab rate for salaried
individuals.

4. SECTION
194-I (RENT)
• The person (not being an Individual
or HUF) who is responsible for
paying of rent is liable to deduct tax
at source, at the rate of :
1. 2% in respect of rent for plant,
machinery or equipment.
2. 10% in respect of other rental
payments (i.e., rent for the use of
any land or building or land
appurtenant to a building,
including factory building or
furniture or fixtures).

5. What is the Meaning of ‘Rent’ in reference to
Section 194I ?
• ‘Rent’ means any payment, by whatever name called, under any lease, sub-lease,
tenancy or any other agreement or arrangement for the use of (either separately
or together) any:
• land or
• Building (including factory building) or
• Land appurtenant to a building (including factory building) or
• Machinery or
• Plant or
• Equipment or
• Furniture or
• Fittings
whether or not any or all of the above are owned by the payee

6. Threshold
Exemption
Limit for TDS
on Rent
• Section 194-I of the Income Tax
Act, 1961 provides that no TDS
would be deducted if the income
credited / paid during the
Financial Year does not exceed
INR 2,40,000.
• Earlier the threshold exemption
limit was INR 1,80,000, however,
from Financial Year 2019-2020
the threshold exemption limit
for TDS on Rent has been
increased to INR 2,40,00

7. Circumstances, wherein, TDS is not deductible
under section 194-I
• The payer / tenant is an individual or HUF who is not liable to tax audit as per
section 44 (AB) clause (a) or (b).
• Rent is paid / payable to a Government agency.
• Sharing or proceeds of film exhibition between a film distributor and a film
exhibitor owning a cinema theatre
• Payments done to cold storage facility: When cold storage facility is used to
preserve perishable items like vegetables, milk etc. then the payment is done
for the cold storage facility and not for the building of cold storage. So TDS is
applicable for the payment done for use of the facility i.e. cold storage and not
for the building of cold storage.
• TDS is not charged on monthly basis but as per the rent period. So if the
payment of the rent is done on quarterly or yearly basis then the tax
deductions are also to be made accordingly i.e. quarterly or yearly.

8. Payment on transfer
of certain immovable
property other than
agricultural land.
(SECTION 194-IA)
• TDS is applicable on sale of
immoveable property wherein the
sale consideration of the property
exceeds or is equal to Rs
50,00,000.
• Sec 194 IA of the Income Tax Act,
1961 states that for all
transactions Tax @ 1% should be
deducted by the purchaser of the
property at the time of making
payment of sale consideration. Tax
so deducted should be deposited
to the Government Account
through any of the authorized
bank branches.

9. Conditions for the application of Section 194IA
• TDS is to be deducted by the buyer and not by the seller.
• There is no TDS applicable under Section 194IA if the transaction is
worth less than Rs.50 lakhs.
• Since September 2019, charges such as club membership, car parking,
maintenance fees, advance fees, electricity fees have also been
included under ‘consideration for immovable property’. This means
that such charges attached to the property will also be added to the
taxable amount.

10. Payment of Rent by certain individuals or Hindu
undivided family
(SECTION- 194-Ib)
• The Finance Act, 2017 has introduced section 194-IB
providing that Tenant of a property making monthly rent
payment exceeding ₹ 50, 000 is required to deduct tax at
the rate of 5% from the rent payable to a resident
landlord.
• if the PAN of the recipient is not available then the rate
will be 20%. However, the amount of TDS cannot exceed
the amount of rent paid for the last month.

11. Payment under
specified
Agreement
(SECTION 194-I C)
• Any person who pays to a resident some
consideration (not in kind) under a Joint
Development Agreement, has to deduct
TDS u/s 194IC, at the rate of 10%
Joint Development Agreement- This is an
agreement between the owner of an asset
(being land or building or both) who
agrees to allows another person to build a
real estate project on such asset, in return
for share and/or payment in cash.
• The rate of the tax deduction is 10%
[7.5% from 14th May 2020 to 31st
March 2021 as relief given by the
Finance Minister due to coronavirus
outbreak]. And if the PAN of the receiver
is not available then the rate is 20%.

12. THANK YOU