How to Calculate TDS on Rent for the F.Y. 2014-15

 


This Article is written in the “payer’s” perspective

Applicable For: Financial Year: 2014-2015

Jump To:

1. Applicable on what type of payments?

2. Should everyone who makes the payment in the nature of Rent should deduct TDS?

3. On what amount should the TDS should be deducted – Threshold Limit

4. How much amount should be deducted as TDS – TDS Rates

5. Example

1. Applicable on what type of payments?

 

tds on rent

Any payment made in the nature of “Rent” towards lease/sub-lease, tenancy agreement entered for use of any of the following:

  1. Land
  2. Building
  3. Machinery
  4. Plant
  5. Equipment
  6. Furniture
  7. Fittings

 

Relevant Important Points:

      1. Ownership Issue: Irrespective of the fact that the above listed assets are owned by the “payee” (i.e., the receiver) or not, TDS should be made on the payment made. Which means that even if the payee is not the actual owner of the land/building, machinery, etc., and receives the payment in whatever capacity, TDS is still to be made even on such kind of payments.
      2. Transport Vehicles: Any payment made towards “transport vehicles taken on hire” are not subjected to TDS (Ref: Asst CIT v. Accenture Services (P.) Ltd [2011] 44 SOT 290/[2010] 8 (Mumbai – Trib.)

 

 

2. Should everyone who makes payment in the nature of Rent should deduct TDS? 

 

No, not all persons are liable to deduct tax at source (TDS), only following persons are liable to deduct tax at source:

    1. Companies, Partnership Firms, AOPs/ BOIs and every other assesse other than an Individual or HUF
    2. In case of Individuals and HUFs only if the following conditions are satisfied:

i.      In case of business: If the total sales, turnover or gross receipts of the business in the preceding financial year i.e., 2013-14 exceeds Rs. 1 Crore;

ii.      In case of Profession: If the total receipts from such profession exceeds Rs. 25 Lakhs.

 

3. On what amount should the TDS be deducted? – Threshold Limit

 

TDS should be deducted by a person mentioned above only if:

The aggregate amount of rent paid or payable or likely to be paid/payable during the current financial year i.e., between 1st April 2013 to 31st March 2014 exceeds or going to exceed Rs. 1,80,000.

So, if the aggregate amount paid or payable is does not exceed Rs. 1,80,000 then TDS need not be deducted.

 

Note: Only Rent Amount to be considered and not the Service Tax element while deducting TDS:

e.g., if Rent payable is Rs. 3,00,000 + Service Tax Rs. 30,900 = Rs. 3,30,900 then TDS should be made only on 3,00,000 and not on 3,30,900

4. How much amount should be deducted as TDS? – Rate of TDS

 

TDS rates applicable for the current financial year (2014-15) for any payments made are as follows:

For use of

PAN Provided

Rate

    1. Machinery or
    2. Plant or
    3. Equipment

Yes

2%

No

20%

    1. Land or
    2. Building or
    3. Furniture or Fittings

Yes

10%

No

20%

Note: No Education Cess should be deducted.

Illustration:

If you are paying Rent with following break up:

Rent on Building  – 3,00,000

Service Tax – 30,900

Total Bill – 3,30,900

 

TDS Should be made on Rs. 3,00,000 @ 2% which comes to Rs. 6,000/- (As we earlier said, Service Tax amount should not be included while calculating TDS on Rent).

Updated: 28th December, 2014

Dilip Kumar

+Dilip Kumar (Author and Editor of The Tax Info) is a CA Student from Hyderabad, Loves Blogging on Tax related matter.

You can Subscribe for his updates on Facebook & Google+

 

3 thoughts on “How to Calculate TDS on Rent for the F.Y. 2014-15

  • June 11, 2015 at 6:16 pm
    Permalink

    ELECTRICITY IS INCLUDED IN RENT FOR DEDUCTION OF TDS? IF YES, IS THERE ANY CASE LAW OR ANY OTHER SUPPORTING IN THIS REGARDS

    Reply
  • May 24, 2015 at 11:04 pm
    Permalink

    Hi,

    Guys will you pls tell me while making the rent payment how much TDS amount would be deducted

    Ex : if rent is Rs 35000/- per month
    if service charge is 12.36.
    how much is the TDS amount would be deducted ???????

    Reply
    • June 2, 2015 at 5:34 pm
      Permalink

      TDS should be deducted at 10% on 35,000, which comes to 3,500 Per Mont

      P.S. As I explained in the article above, while deducting TDS on Rent, Service Tax value should not be considered

      Reply

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