Rent under section 194i with effect from 1 June 1994
Threshold limit for TDS: - where any rent payable under any lease, sub-lease, penancy, or any other agreement for the use of any land, building or land appurtenant to a building or machinery or plant or furniture or fitting exceeds Rs. 120000 during the financial year, tax is required to be deducted at source. It is immaterial whether any such object is owned by the payee or not
Renting of machinery, plant and equipment have been brought under the umbrella of TDS with effect from 30-07-2006. Thus, leasing and hire /purchase agreements of machinery/plant are now also covered under the scheme of TDS.
Person liable to TDS: - any person who is responsible for paying to a resident any income by way of rent exceeding Rs. 120000 during the financial year 2008-09 is required to deduct tax at source. However, an individual or a H.U.F. should deduct tax at source, provided such individual or H.U.F is engaged in business or profession, whose receipts during the financial year immediately preceding the financial year in which such amount is paid or credited to the account of the payee, exceeds Rs. 40 Lakhs in case of business and Rs. 10 lakh of profession.
Scope of deduction: - circular no 715 dated 8 august 1995 and circular no 718 dated 22 august 1995, the following clarifications are issued.
Sub-letting for putting up a hoarding: - if a person has taken a particular space on rent and thereafter sub-lets the same fully or in part for putting up a hoarding, he would be4 liable to TDS under section 194 and not u/s 194C.
Non refundable deposit liable to TDS: - in cases where the tenants make a non-refundable deposit tax would have to be deducted at source as such deposit re-presents the consideration for the use of the land or the building and therefore partakes the nature of rent as defined in section 194i. If however, the deposit is refundable, no tax would be deductible at source. If the deposit carries interest, tax to be deducted on the amount of interest will be governed by Sec 194A.
Warehousing charges liable to TDS.
Service tax not liable to TDS.
Joint payees having definite share in property: - if there are number of payees, each having definite and ascertainable share in the property, the limit of Rs. 120000 will apply to each of the payee/co-owner separately.
Income content of the payment to be ignored: - the tax is to be deducted from the actual payment and there is no need of computing notional income in respect of a deposit given to the landlord. If the deposit is adjustable against future rent, the deposit is in the nature of advance rent subject to TDS.
Format of agreement not relevant: - in case where the agreement is styled as a business centre agreement, the incidence of deduction of tax at source will not be affected, since it does not depend upon the nomenclature
In case of composite arrangement for user of premises and provision of manpower for which consideration is paid as a specific percentage of turnovers, if the composite agreement is in essence an agreement for taking the premises on rent, tax will be deducted under section 194 I from payment thereof.
Letting of a part of building: - the definition of the term any land or any building would include a part or portion. Hence section 194 I would apply to rent paid for the use of only a part or portion of any land or building (circular no. 718 dated 22 august 1995).
Payment to regular hotel accommodation liable to TDS: - payment made for hotel accommodation taken on regular basis is in the nature of rent subject to TDS under section 194I. Where earmarked rooms are let out for a specified rate and specified period, it would be constructed to be an accommodation on regular basis. However where a rate contract is made with a hotel to ensure lower room rent over a specified period and there is no obligation on the part of the hotel to let out earmarked rooms at a specified rate for a specified period, such case fall to outside the scope of TDS provisions and it cannot be said that the accommodation is hired on regular basis (Circular no 5 dated 3 July 2002).
Timings of TDS: - Tax deduction should be made either at a time of payment or at the time of credit, whichever is earlier. The payment may be in cash, cheque or DD.
Rates of TDS:-Check TDS rates from here.
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