If you are paying rent then you should be aware all about TDS on payment of rent as the liability of TDS arise on payer not on the receiver of rent. This write up will deal with all the points relating to TDS on payment of rent.

Assessee liable to deduct TDS

Person making payment of rent to any resident is liable to deduct tax at source (TDS) u/s 194I when the aggregate amount paid or credited or likely to be paid or credited to the recipient exceed Rs. 1,80,000/- during the year.

But, it is important to note that if the assessee is an Individual or HUF then they have to deduct TDS only if they are liable for audit u/s 44AB.

In co-ownership

Limit of Rs. 1,80,000/- p.a. is per taxpayer. So, when there are more than one owner of an asset limit of Rs. 1,80,000/- p.a. will apply for each owner.

Rates of Deduction

Two TDS deduction rate has been prescribed as per the type of assets:

• Use of Machinery/Plant/Equipment – TDS @ 2%
• Use of any other assets like Land, Car etc. – TDS @ 10%

TDS excluding Service Tax

You should be aware of the fact that, liability to pay service tax also arises if your landlord is receiving from one source or more amount exceeding Rs. 10 lacs (for rent services or any other services). So, you will be liable to pay service tax also and TDS has to be deducted on the rent amount excluding service tax.

For example – If you are paying rent of Rs. 100000 then computation will be as follows:

Actual Rent Paid               –               Rs. 1,00,000

Add: Service Tax @ 12.36 %          Rs.    12,360

Less: TDS on Rent @ 10%                Rs.    10,000

Lower/Nil Deduction of TDS on Rent

Receiver may file an application to the AO for lower/Nil deduction of TDS if his income is below the tax exemption limit.

No Education Cess & SHEC

On TDS on rent no additional Education Cess (EC) or Secondary & Higher Education Cess (SHEC). Moreover, Surcharge is also not applicable except where payment is made to foreign company and the amount exceeds Rs. 1 Crore.

Advance Rent & Security Deposit

TDS on advance rent is also required to be deducted. In case of security deposit, TDS has to be deducted only if it is non-refundable.

Disclosure of PAN of Landlord in ITR

Individuals paying rent more than Rs. 1 lakh annually have to mandatorily provide the PAN of the Landlord in Income Tax Return.

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