As per section 194I, any person (except individual and HUF) is liable to deduct TDS on rent paid by him if the total amount of rent paid during the financial year exceeds Rupees 1,80,000/-. The provisions of this section shall apply to individuals and HUFs only if they are subject to tax audit. Such TDS has to be deducted at the time of payment of rent. Hence, if the rent is paid monthly, TDS will be deducted monthly; if the rent is paid quarterly then TDS shall be deducted quarterly and so on .
The limit of Rupees 1,80,000/- is applicable per tax payer, i.e. TDS shall be deducted only if rental income of the tax payer is more than 1,80,000/-. This can be understood from the following example:
Example 1: If there are two co-owners of the property and total rent paid to the co-owners is Rupees 2 lakhs, which means that the rental income of each co-owner is 1 Lakh, i.e. less than 1,80,000/-, hence in this case TDS is not required to be deducted.
Example 2: If there are two co-owners of the property and total rent paid to the co-owners is Rupees 4 lakhs, which means that the rental income of each co-owner is 2 Lakhs, i.e. more than 1,80,000/-, hence in this case TDS is required to be deducted.
TDS on transfer of Immovable Property
As per section 194IA of Income Tax Act, “Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.”
Thus it can be construed that, in case of transfer of immovable property, the buyer/transferee is responsible to deduct tax at source on the amount to be paid at the rate prescribed before making the payment to the transferor. However, this provision shall not be applicable in case the amount of consideration to be paid is less than Rupees 50 Lakhs.
Hence, it can be noted that the provisions of this section is applicable only if following conditions are satisfied:
- There has to be a transfer of immovable property
- Such immovable property should be property other than agriculture land
- Purchase consideration to be more than Rupees 50 lakhs
- The seller/ transferor of the property to be a resident