Renting of house is a contract in which owner give possession of his property to the tenant for some consideration. In this article we will discuss all concepts of TDS on House Rent.
Meaning of House Rent
Renting of House includes lease, sub lease, tenancy or any other contract or agreement or arrangement for the use of:
- Any Land
- Any Building/Apartment
- Any Land attached to such building
Section for TDS on House Rent
There are two sections involved in TDS on Rent of House.
- Section 194I
- Section 194IB
As per section 194IB if an individual or HUF liable for payment of any rent to a resident person, then such individual or HUF needs to deduct TDS on such rent.
Such individual or HUF must not be the Individual or HUF having business turnover exceeding Rs. 1 Crore or professional receipts Rs. 50 Lakhs during immediate previous financial year.
For Individual or HUF whose business turnover or professional receipts exceeds Rs. 1 Crore or Rs. 50 lakhs respectively, then such individual or HUF are liable to deduct tax on house rent under section 194I.
Limit for TDS on Rent of House
As per section 194IB no TDS is deducted if the rent paid does not exceeds Rs. 50,000 in a month.
As per Section 194I no TDS is deducted if the rent paid during the financial year does not exceeds Rs. 2,40,000 .
TDS rate on House Rent
As per Section 194IB TDS rate is 3.75% (earlier @5%) of the house rent in case monthly rent exceeds Rs. 50,000 per month.
(TDS rate has been reduced to 3.75% due to covd-19 from 14/05/2020 till 31/03/2021.)
As per section 194I, sub clause (b), TDS rate is 7.5% (earlier @10%) of the house Rent In case yearly rent exceeds Rs. 2,40,000 per Annum.
(TDS rate has been reduced to 7.5% due to covd-19 from 14/05/2020 till 31/03/2021.)
Other exemptions
- No TDS on House rent deducted u/s 194I if paid or credited to a real estate investment trust owned directly by such business trust.
- If the person receiving rent makes an application to A.O.(Assessing Officer) in Form 13 that his total income for the financial year is below the basic exemption limit then the A.O after satisfying himself grant a certificate in FORM 15AA for less deduction or No deduction of TDS on the rent he receives.
Examples on TDS on house rent
1 – If Mr. A has rented his House to Mr. B (covered under section 194IB, business income does not exceeds Rs. 1 Crore) & has a monthly rent agreement of Rs. 12,000 then tax will not be deducted as it does not crosses the threshold limit of Rs. 50,000 monthly.
2 – If Mr. A has rented his house to B Ltd. (covered under section 194I i.e his business income exceeds Rs. 1Crore) & has a monthly rent agreement of Rs. 18,000 and then TDS will not be deducted as the Rent during the Financial Year does crosses Rs. 2,40,000.
3 – If Mr. A has rented his a house to Mr. B (covered under section 194I i.e his business income exceeds Rs. 1Crore) & has a monthly rent agreement of Rs. 80,000 and suppose TDS rate is 7.5% then TDS will be deducted @7.5% on Rs 9,60,000 (Rs.80,000X12 which equals to Rs. 72,000.
Latest Notification
Due to Covid -19 The Finance Minister has reduced to rate of TDS by 25% to ensure more funds in the hands of Recipient of Rental Income on House , so from 14/05/2020 to 31/03/2021 TDS on Rent of House
U/S 194I is reduced to @7.5% (earlier it was 10%)
U/S 194IB is reduced to @3.75% (earlier it was 5%)
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