Income Tax: How TDS provision applies on rent paid














With an aim to negate chance of tax evasion, the Income Tax Department incepted Tax Deduction at Source (TDS) on transaction in certain cases, which includes rental payment. As per the income tax law, TDS on rent paid can be categorised in two parts — rent paid buy a businessman and rent paid by an individual or Hindu Undivided Family (HUF). TDS on rent paid by a businessman is mentioned in Section 194 I while TDS on rent paid by an individual or HUF is mentioned in Section 194 IB of the Income Tax Act.


Speaking on the TDS provision on rent paid by an individual Mumbai-based tax and investment expert Balwant Jain said, "For an individual or HUF, if the monthly rent is ₹50,000 or more, then the renter will have to deduct 5 per cent of the total monthly rent under Section 194 IB." He said that the renter can either submit the TDS deducted from the rent to the Income Tax Department on monthly basis or can deposit the entire TDS amount in the month of March before the end of financial year.

On what income tax law says on TDS provision for the rent paid by a businessman SEBI registered tax and investment expert Jitendra Solanki said, "Under Section 194 I of the Income Tax Act, if a businessman is paying ₹2,40,000 or more rent per annum then it will pay the monthly rental deducting TDS. The TDS will be 10 per cent of the total monthly rent and the businessman will have to submit this TDS at the Income Tax Department by the end of that month."\

Solanki said that ₹2.4 lakh per annum limit is for each payee not for each property. He said that if a property owner has rented out more than one property to the same payee, in that case 10 per cent TDS will become applicable on the net rent paid by the renter if the total rent of all the properties let out is more than ₹2.4 lakh per annum.


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