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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 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.
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:
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
All payments exceeding ₹2,40,000 are covered under Section 194-I. Here is the list:
There are some rules for TDS on rental income as per Section 194-I:
You are liable to deduct TDS on rent of property as per Section 194-I if:
TDS on rent of property is deducted when you pay the rent. Check out the TDS rates on rent here!
Types of Rent | TDS on rent |
Building, Land, Fitting, Furniture | 10% on the rent amount that you need to pay |
Plant, Machinery, Equipment | 2% on the rent amount that you need to pay |
HUF/Individuals Not Liable to Tax Audit | 5% TDS on the rent amount you need to pay |
The following payments are exempted from TDS on rent if:
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.
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.
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.
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.
You can make any TDS payment using your preferred mode of payment, offline or online.
Here are three offline TDS payment modes:
There are two online TDS payment modes:
Go through this table to match your scenario and find out if you need a challan or not.
Scenario | Time limit for TDS Deduction | Challan Required/Not |
If transaction is done on behalf of the Government | Same day | No |
If it is a non Government transaction | On or the week before the end of the month of TDS deduction | Yes |
If the TDS amount is paid in March | On or before 30th April | Yes |
Others | On or the week before the end of the month of TDS deduction | Yes |
Here are the consequences of not paying TDS on rent of property on time:
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!
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