As a CA firm, we often encounter clients baffled by the intricacies of Tax Deduction at Source (TDS) on rental income.
Itโs a maze of compliance that can seem daunting, but itโs crucial for avoiding legal pitfalls and penalties.
Hereโs a distilled version of what you need to know:
๐ Section 194I Explained: Mandated by the Income Tax Act, this section requires TDS on any income from renting property, be it land, buildings, or machinery. Itโs a move to streamline tax collection and curb evasion.
๐ผ Whoโs Affected? Everyone, except individual or HUF not liable to tax audit, must adhere to these rules. The threshold for TDS on rent is โน2,40,000 for FY 2024-251234.
๐ Rates to Remember: The TDS rate is 2% for plant and machinery, and 10% for land and buildings. Donโt forget, if the payeeโs PAN isnโt provided, the rate jumps to 20%1234.
๐ Exclusions to Note: Security deposits arenโt subject to TDS unless theyโre adjusted against rent. The same goes for advance rent thatโs not a refundable deposit1234.
๐ The Bigger Picture: TDS on rent aligns India with global practices, ensuring a steady revenue flow to the government and simplifying tax administration.
๐ Looking Ahead: With the threshold limit increased from โน1,80,000 to โน2,40,000, thereโs a clear intent to ease the tax burden on smaller property owners and tenants1234.
As we embrace the new financial year, letโs demystify TDS on rental income together.
