Section 194I deals with TDS on rent paid.
Whenever a person is liable to pay an amount exceeding the specified limit for rent, he will deduct TDS at specified rates under section 194I.
For Example, Mr. A pays rent to Mr. B of Rs. 45,000 per month during the year. Mr. A will deduct TDS on Rs. 45,000 and pay the balance amount to the Mr.B.
But don’t worry section 194I is not applicable for every person. It is applicable for some specified persons and the amount payable must exceed the specified monetary limit.
Transactions for which 194I is applicable
Note: (i) “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,—
(a) land; or
(b) building (including factory building); or
(c) land appurtenant to a building (including factory building); or
(d) machinery; or
(e) plant; or
(f) equipment; or
(g) furniture; or
whether or not any or all of the above are owned by the payee;
When TDS Under Section 194I is deducted
TDS under section 194I shall be deducted at the time of credit of such sum to the account of payee or at the time of actual payment, whichever is earlier.
Note: Even if a person is crediting in his books the amount to suspense account, he will be liable to pay TDS from that day onwards.
Who are persons liable to pay TDS under Section 194I
The Following persons are liable to pay TDS under section 194I.
- All persons except Individuals and Hindu Undivided Family (HUF)
- Individuals and Hindu Undivided Family (HUF) are liable to deduct tax under section 194I only if they were liable to tax audit in the preceding financial year.
Note: Tax audit is applicable only when the gross receipts/turnover exceeds the monetary limit specified in section 44AB.
What is the rate of TDS under section 194I
The TDS rate under section 194I is divided into two parts.
- 2 % for the use of any machinery or plant or equipment; and
- 10% for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings:
No surcharge and Cess is applicable.
In the above example Rs.4500 will be deducted by Mr. A from the total sum payable.
Note: TDS is always deduct on basic part excluding the service tax part.
What is the monetary limit for TDS under section 194I
TDS is not deducted if the amount payable does not exceed Rs. 180,000 in the financial year to the same person.
In the above example Mr. A is liable to deduct TDS since the amount payable may exceeds Rs. 1,80,000 for whole year.
What is the proof of TDS deducted under section 194I
The deductor (person deduction TDS) will issue TDS certificate to the Deductee in Form No. 16A.
Read here the full details on Form 16A.
What is the rate interest rate for late payment of TDS
Please comment for queries on section 194I.