TDS On Rent: Limit, Rules & Payment Steps

Table Of Contents

1. TDS On Rent #1: TDS: Meaning & Full Form
2. TDS On Rent #2: ​TDS On Rent: Definition Of “Rent”
3. TDS On Rent #3: TDS On Rent Of Property: Payments Covered Under Section 194-I
4. TDS On Rent #4: TDS On Rent: Rules
5. TDS On Rent #5: Who Are Liable For TDS On Rent Deductions?
6. TDS On Rent #6: TDS On Rent Of Property Rates
7. TDS On Rent #7: Who Is Exempted From TDS On Rent?
8. TDS On Rent #8: TDS On Rental Income: Calculation For Commercial Property
9. TDS On Rent #9: TDS On Rental Income: Calculation For Residential Property
10. TDS On Rent #10: How To Fill A TDS On Rent Form?
11. TDS On Rent #11: Offline TDS Payment Modes
12. TDS On Rent #12: Online TDS Payment Modes
13. TDS On Rent #13: What Is The Time Limit For TDS Deductions?
14. TDS On Rent #14: What Happens If TDS Is Not Deducted?

TDS (Tax Deduction at Source) is deducted from your monthly salary, fixed deposits, and when you sell a property. But do you know TDS is deducted from rent too? Yes, TDS on rent of a property applies to the residents of India and all Indian taxpayers. 

Know how TDS payment works, what is TDS on rent limit, and everything about TDS on rental income here!

TDS: Meaning & Full Form

TDS is the abbreviation for Tax Deduction at Source. The Central Government introduced TDS to collect taxes from sources of income. TDS on rent covers the income earned by tax deduction at the source. 

Rent is subject to TDS as per Income Tax Act’s Section 194-I. As per this section, any rental income, any rented land, plant, machinery, furniture, or fittings are subject to TDS. Based on this section, any person liable to pay someone else a specific amount must make a tax deduction at source and transfer to the Central Government account through any authorised banks.

Let us take an example to understand better!

You started working in company X. They are required to pay you ₹45,000 every month and TDS for the current financial year is 10%. They will deduct ₹4500 and make the rest of the payment to you. So, company X will pay you ₹40,500 after the deduction. The Central Government receives the deducted amount as professional tax. 

TDS On Rent: Definition Of “Rent”

When you think about the word rent, the first thing that comes to mind is the rent of a house. As per the Income Tax Act, rent is an amount under lease, sub-lease, or tenancy. You pay the rent in exchange for:

• Land

• Building (commercial or residential)

• Plant

• Machinery (used in factories or offices)

• Furniture

• Fittings

• Equipment (network gadgets, laptops, desktops) 

No TDS is deducted from the deposited amount. The owner returns the deposit once you return assets or vacate the premises. The deposit amount is not considered income, as per Income Tax Act, Section 194-I. 

Also Read & Find Out Tax Benefits Of Renting Out Your Property

TDS On Rent Of Property: Payments Covered Under Section 194-I

All payments exceeding ₹2,40,000 are covered under Section 194-I. Here is the list:

• If you rent a building and furniture from two different owners, the TDS payment will be liable for building rent.

• If rent is applied to a factory’s building, you can receive it as business income or income by property. If you consider it business income, TDS on rental income is deducted from the source only as advance tax. You can submit rent receipts based on Section 194-I.

• If you own a business centre, the service charges are included in the amount that is liable for TDS on rent of property. 

• If you pay your rent based on a different rental schedule, your TDS payment is applied accordingly.

TDS On Rent: Rules

There are some rules for TDS on rental income as per Section 194-I:

• The TDS on rent gets deducted if you pay rent from the total payable rent amount. 

• The deducted TDS from rent must be transferred to the Central Government’s account.

• The TDS on rent limit is ₹2,40,000 in the current financial year.

Who Are Liable For TDS On Rent Deductions?

You are liable to deduct TDS on rent of property as per Section 194-I if:

• You are paying rent to a resident of India.

• Your individual or HUF’s monthly rent exceeds ₹50,000. 

TDS On Rent Of Property Rates

TDS on rent of property is deducted when you pay the rent. Check out the TDS rates on rent here!

Who Is Exempted From TDS On Rent?

The following payments are exempted from TDS on rent if:

• The amount of rent is below ₹2,40,000. 

• The Government or local authority owns the rented premises.

• The rent is paid to a government body or agency.

• The tenant owns a business, and their turnover is one crore.

• The tenant is a professional and made ₹50,00,000 in the last financial year.

How To Calculate TDS On Rent?

The TDS on rent of property is deducted when you pay a taxpayer, and the taxpayer is an Indian resident as per the Income Tax Act. It is calculated for residential and commercial properties.

TDS On Rental Income: Calculation For Commercial Property

The TDS applicable on a commercial property is 2% of the payable rent. Let us take an example to understand the concept better. 

Say an organisation rented a plant for ₹62,000 a month. The TDS rate on rent will be 2%. The TDS will be (2% of 62,000)*12 = ₹14,880.

TDS On Rental Income: Calculation For Residential Property

The TDS applicable on a residential is 5% of the payable rent. Here is an example to help you understand this better.

Let us say you rented a property for ₹30,000 a month. The TDS rate on rent will be 5%. The TDS will be (5% of 30,000)*12 = ₹18,000.

How To Fill A TDS On Rent Form?

Here are all the steps to fill out the form for TDS on rent on the Tax Information Network of the Income Tax Department’s website. 

Step 1: Visit the website and scroll down. 

Step 2: Click on “Quick links”

Step 3: Expand the category “Tax Payment - Quick Links” 

Step 4: Click on “TDS on Rent of Property”

Step 5: Click on “Online Form for Furnishing TDS on Rent of Property (Form 26QC)” under “TDS on Rent of Property” on the left-hand side. 

Step 6: Select “TDS on Rent of Property (Form 26QC)” from the list of forms

Step 7: Fill up Form 26QC on your screen. 

Step 8: Furnish all the required details like address, property, and tax payment 

Step 9: Once you fill out the form, submit it & make the required payment.

Different Modes Of TDS Payment

You can make any TDS payment using your preferred mode of payment, offline or online.  

Offline TDS Payment Modes

Here are three offline TDS payment modes:

• Pay by Cash: Pay the TDS on rent of property via cash on the counter of your bank’s branch. Get a receipt for the tax payment.

• Pay by Cheque: Pay the TDS on rent of property via cheque to your bank’s branch. Write a cheque to the Income Tax Department and take the receipt for the tax payment.

• Pay by NEFT/RTGS: Visit your bank’s branch, complete the form and submit it at the bank’s counter.

Online TDS Payment Modes

There are two online TDS payment modes:

• Pay by Net Banking: Log in to your online bank account using your banking credentials. Find the option for TDS on rent payment under the payments section. Once you make a payment, you will receive a Challan Identification Number. Use it to check your payment status.

• Pay by Mobile Banking: Log in to your mobile application using your banking credentials. Find the option for TDS on rent payments. Make the payment & check with your bank once too.

What Is The Time Limit For TDS Deductions?

Go through this table to match your scenario and find out if you need a challan or not.

What Happens If TDS Is Not Deducted?

Here are the consequences of not paying TDS on rent of property on time:

• If you have deducted but not paid TDS on rent of property on time, you will have to pay a 1.5% interest rate per month from the month the TDS rent deduction began to the month it is paid.

• If you are liable to deduction of TDS on rent of property and did not get it deducted, you will have to pay a 1% interest rate per month from the month the TDS rent deduction began to the month it is paid.

Conclusion:

We hope you got every piece of information about TDS on rent and TDS rate on rent. Bookmark it and understand it thoroughly before this financial year ends!