In this article we will discuss all major concepts related to TDS on Rent of machinery.
TDS on Rent of machinery is covered under section 194I.
As per this section if any rent is paid by a person (other than individual or HUF) for renting of any machinery or equipment or plant, TDS will be deducted.
Those individual or HUP whose business income or professional income exceeds Rs. 1 Crore or 50 Lakhs respectively, are covered under this section.
Example 1 – If Mr. A has rented a machine to Mr. B & has a monthly rent agreement of Rs. 80,000. Suppose TDS rate is 1.5% then tax will be deducted @1.5% on Rs 9,60,000 (Rs.80,000 X 12) which equals to Rs. 14,400.
TDS rate on Renting Machinery
TDS will be deducted @1.5% (earlier it was 2%) of the Rent amount.
(TDS rate has been reduced to 1.5% due to covd-19 from 14/05/2020 till 31/03/2021.)
Limit for TDS on renting Machinery
When the amount of Rent does not exceed Rs. 2,40,000 for a financial year then TDS should not be deducted U/S 194I.
Example 2 – If Mr. A has rented his machine to Mr. B & has a monthly rent agreement of Rs. 12,000, then tax will be not be deducted as it does not crosses the threshold limit of Rs. 2,40,000.
Example 4 – If Mr. A has rented his machine to Mr. B & has a monthly rent agreement of Rs. 80,000 and suppose TDS rate is 1.5% then tax will be deducted @1.5% on Rs 9,60,000(Rs.80,000X12) which equals to Rs. 14,400
Example 5 – Now suppose in Example -4 Mr. B has sub – rented the mixture machine to Mr. C at a monthly rent of Rs. 90,000 then tax will be deducted @1.5% on Rs 10,80,000(Rs.90,000X12) which equals to Rs. 16,200.
Due to Covid -19 The Finance Minister has reduced to rate of TDS by 25% to ensure more funds in the hands of Tenants of machinery, so from 14/05/2020 to 31/03/2021 TDS rate u/s 194I(a) is reduced to @1.5% (earlier it was 2%).