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12 points to know about TDS on Rental Income

Letting of property attracts TDS provisions, with certain exceptions. Some of the commonly asked questions about TDS on rental income are summarized below. In case, readers have any other questions, please mention in the comment section.

 

  1. Limit of Rs.180000 – In case, any property – residential or commercial is let out to anybody – individual or company, for an annual rent of Rs.180000 or less, no TDS provision is applicable 
  1. Co-owners – In case of co-owners of the property, the basic exemption limit of Rs.180000 is applicable to each co-owner. Suppose, a property is owned by father, mother and son (3 owners), the exemption limit is Rs.540000. 
  1. No TDS is applicable if the property is let-out to Individuals for residential purpose. 
  1. No TDS is applicable if the property is let-out to Individual for commercial purpose, if the total business turnover (sales) of the person/proprietor is less than Rs.1 Crore per year. 
  1. TDS is to be done on the base rent only. For example, on a rental invoice for Rs.100000 per month, Rs.12360 is added as service tax, TDS is to be done on the base rent of Rs.100000 and not on 112360. 
  1. TDS Rate on renting of plant and machinery or Equipment is 2%. TDS Rate on renting of land and building, furniture, car or any other asset is 10% of the base rent. If the owner is not having PAN, TDS to be done at 20% 
  1. The owner of the property can apply for lower deduction of tax (TDS). Out of the rental income, interest paid on construction loan, property tax and standard deduction can be reduced for tax purpose. If by doing so, the total tax payable is less than TDS amount, the owner can claim refund. Instead of claiming refund at the end of the year, he can apply for lower/nil deduction of tax certificate from income tax department 
  1. No TDS provision is applicable on refundable rent deposit. 
  1. Rent includes service charges: Service charges payable to business centres are covered under the definition of rent, as they cover payments by whatever named called. Hence, TDS on rent at 10% to be done. 
  2. TDS requirement where rent not payable on monthly basis: Sec. 194-I does not mandate that the tax deduction should be made on month-to-month basis. Therefore, if the crediting of the rent is done on quarterly basis then deduction at source will have to be made on the quarterly basis only. Where the rent is paid on yearly basis deduction also will have to be made once a year on the basis of actual payment or crediting. 
  3. Payments to hotels for holding seminars including lunch: Where hotels do not charge for use of premises but charge for catering/meal only, then provisions of Sec.194I would not apply. However, Sec.194C would apply for catering part.
  4. Where the payee is the Government at agency: Under the provisions of Sec. 196, no tax is required to be deducted at source from any sums payable to the government.

 

Also Read: 

11 points to know about tax on property income (Tax on Rental Income)

 

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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]
  • Roja

    if the landlord is an Individual and the tenant is a company ,then is TDS to be deducted by the landlord?