How does TDS Provision affect the rent under Income Tax Law?

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Property for Rent in India


Before you learn about how TDS works you need to learn what TDS is. TDS is a part of Income Tax Department. The tax department introduced TDS to collect tax from every individual from their source income. Their objective is if a person is capable of paying tax then they will charge a certain amount from their source income. After deducting the tax the department issue a TDS certificate or Form 26AS on the name of the tax payer.


In due course people often try to evade taxpaying procedure. This is the reason tax department impose tax on several incomes. Under Income Tax Law one has to pay tax on Property for Rent in India. In this article you are going to have an idea how much tax money is levied on rent.


Idea about TDS on Rent
Under Section 194Iof Income Tax Act, mandates that an individual has to pay 10% of the rent as tax on any land. If the individual pays the rent annually then the aggregate goes up to 2.40 lakhs rupees. If you have more than one property and you let out the properties on rent in the same time then you may exceed to 2.40 lakhs rupees.


Who is Eligible to Pay TDS on Rent?
The current provision is applicable for every tax payer. The TDS system includes firms, trusts, companies, associations besides individual person. Although, the person who is on rent if the person is associated with any business then only they have to pay tax on tent. In the case of a modest business the turnover is huge. This is the reason Income Tax Department levies tax on rent.


Calculation Procedure of TDS on Rent
The Income Tax Law is applicable on the permanent resident of India. And the tax is levied when the rent payment exceeds 2.40 lakhs rupees. In the case non-resident the tax is deducted as per Section 195 of the Income Tax Act. In that case there is no strict limit of 2.40 lakhs rupees per year.


No matter whether you are paying for a land or for a building, the tax is mandatory. It is also important to note that, the recipient does not have to be the owner of the property. Like residential payment tax, same tax is applicable for hotels as well. If you rent a room at any hotel, you need to pay tax along with room charge.


The hotel provided you room to stay and that is the reason you need to pay tax. This is the bottom line of tax payment on rent. Depending on the type of hotel, the percentage of tax varies.


Time of TDS Deduction on Rent
There is a time for paying the tax and that is when you are paying the rent. The payment will be credited to the recipient’s account. If you are making an advanced payment, then you can pay the tax while paying. In such scenario you can pay the tax for the year in advance. The tax will reach to the government of India. You need tax deduction account number or TAN, along with a challan. The challan is the proof that you deposited your tax.


In order to ease up the process, government decided to deduct tax on 5% rate monthly. Government has expanded the scope so that people do not find taxation difficult. As per the law the payer has to deduct tax in the last of the year. With help of this new provision people who are not associated with any business can now pay tax.


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1 Comment

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    Aakansha Rathod

    20 January, 2021 at 4:14 pm

    This is a great inspiring article. I am pretty much pleased with your good work. You put really very helpful information.

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