TDS Section 194I, 194IB & 194IC for TDS Under Income Tax Act

The only things that knock our minds when we listen to the word ‘rent’ are the payment which has to be paid at the beginning or at the end of every month. This can be understood by the person who lives in the rented house or has to give any rent like the machine rent, office rent, etc. This small word ‘rent’ puts great pressure on people. Under the Income Tax Act, Section 194I, 194IB is for the TDS on Rent which we will see in detail in this article.

Who is Required to Deduct TDS u/s 194I?

Any person except the individual / HUF who pays an income which is called rent to another person needs to cut down the TDS u/s 194I. On the other hand, if the Individual / HUF is audited under 44AB (a) and (b) then they must also cut down the TDS under u/s 194I.

Define Rent?

Rent is defined as the payment which has to be paid by a person if he or she has taken any of the given below in use-

• Building (also factory building)
• Land
• Plant
• Machinery
• Furniture
• Equipment
• Fittings

What is the Rate of Tax Deduction u/s 194I?

Given below is the rate of the tax under 194I:

• If any machine/plant/ equipment is used, then 2 per cent of the tax will be deducted.
• If any land/building (also factory building) or both /furniture/fittings is used then the tax deducted will be 10 per cent.

What is the Time of Tax Deduction u/s 194I?

The tax must be deducted before crediting the amount into the receiver’s account or the actual payment is done by cheque, cash, draft or any other mode.

TDS is not required to be paid if;

• The rent amount paid (at once or total in a fiscal year) to a receiver should not be more than Rs 1,80,000. From the F.Y 2019-20, the limit has become Rs 2,40,000
• The amount paid as rent to a business trust i.e. a real estate investment trust mentioned u/s 10(23FCA)

Some Special Points to Consider

• If an amount is paid for using the warehouse then the TDS u/s 194I must be charged.
• If an amount is paid as security to the owner then the TDS u/s 194I will not be charged. But if that amount is considered as rent then the TDS u/s 194I will be charged.
• Under the 194I, the TDS will be charged if the business centre is on rent.
• TDS will be charged u/s 194I if the hotel is used daily i.e. in an agreement.

Also to note that any TDS paid by an employer to the employee is meant to be reimbursed then there is no provision for TDS applicability.

The TDS will not be charged if the individual is allowed to audit under section 44AB.

Read Also: Brief Details of Revised Format Form 16 (Salary TDS Certificate)

Section 194IB: TDS on Payment of Rent by Individuals/HUFs

We read above about Section 194I which only allows the Individuals / HUFs to pay the TDS who are audited under section 44AB. So, to bring out the individuals / HUFs who pay huge amounts of rent but still are not audited, Section 194IB came into existence in Budget 2017.

Who is Required to Deduct TDS u/s 194IB?

If any Individual/HUF (not liable to audit u/s 44AB) pays the rent amount to the owner is needed to cut down the TDS under section 194IB.

What is the Rate of Tax Deduction u/s 194IB?

Given below is the rate of tax that must be deducted u/s 194IB:

• 5 per cent, if the recipient’s PAN is available
• 20 per cent, if the recipient’s PAN is not available.

Keep in mind that the amount of TDS must not be more than the rent paid in the previous month.

What is the Time of tax Deduction u/s 194IB?

The tax must be deducted u/s 194IB before;

• Crediting the rent (for the end month in the past year or the closing month of the tenure if the property is left earlier during the year), or
• The actual payment is done through cash, cheque, draft or other modes.

TDS is not required to be paid if;

• The rent amount paid must not be more than Rs 50,000 per month.
• TDS is cut down u/s 194IB, then TAN is not required.

Read Also: Easy Guide to TDS Provisions Under Income Tax Act 1961

Section 194IC: TDS on Payment Made Under Specified Agreement

Section 194IC was recently introduced from the Budget 2017. Its main aim was to bring the ‘Joint Development Agreements’.

Who is Needed to Deduct the TDS u/s 194IC?

Any person paying the owner under the Joint Development Agreement is required to deduct the TDS under this section.

What is a Joint Development Agreement?

A Joint Development Agreement is an agreement between two people i.e. the owner of the land or building and another person who is given permission to build a real estate project and in return, he or she must give a share to the owner or the payment in cash must be done.

What is the Rate of Tax Deduction u/s 194IC?

Given below is the rate of tax that must be deducted under section 194IC:

• 10 per cent if the receiver has the PAN
• 20 per cent, if there is no PAN of the receiver.

What is the Time of Tax Deduction u/s 194IC?

The tax must be deducted u/s 194IC before;

• Crediting the rent amount into the account of the receiver or owner or;
• Actual payment must be done in a cheque, draft, cash, or any other modes

Also note that, under section 194IC, the threshold limit or exemption limit is not present.