Understanding TDS on Rent: Rates, Exemptions, and Compliance

Did you know? Tax Deducted at Source (TDS) applies even on monthly rent payments below ₹50,000. But beware! Failure to deduct TDS can incur a penalty of 1% per month plus ₹200 per day. Let's demystify TDS on Rent:

  1. TDS on Rent: Any individual paying rent to a resident must deduct TDS, either upon income credit or payment via cash/cheque/draft, whichever comes first. Exceptions apply to Individuals/HUFs not specified.

  2. TDS Rates: TDS rates differ:

    • 2% for plant, equipment, and machinery rent.

    • 10% for land, building, furniture, or fitting rent.

  3. Tax Deduction Liability: Liability lies with entities other than Individuals or HUFs, like companies, partnerships, LLPs, etc. Individuals/HUFs are liable if their total sales/turnover exceeds ₹1,00,00,000 or gross receipts exceed ₹50,00,000 in professions.

  4. Exemptions: No TDS if total annual rent doesn't exceed ₹2,40,000. TDS should match the frequency of rent payments.

  5. Example: XYZ Private Limited rents a building at ₹25,000/month from Mr. B. Total annual rent: ₹3,00,000. TDS of ₹30,000 (10% of ₹3,00,000) should be deposited by XYZ on behalf of Mr. A.

  6. Lower TDS Rates: To pay TDS at a reduced rate, follow these steps:

    • Apply in Form 13 to the A.O.

    • If justified, the A.O. may issue Form 15AA for lower/no deduction.

  7. Co-Owner Benefit: Each co-owner enjoys the ₹2,40,000 exemption individually if they have a definite share in the property.

By understanding TDS on rent, you ensure compliance and avoid penalties.