{"id":34395,"date":"2021-08-14T10:00:02","date_gmt":"2021-08-14T04:30:02","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=34395"},"modified":"2021-08-15T07:12:42","modified_gmt":"2021-08-15T01:42:42","slug":"tds-on-rent-demystifying-misconception","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/tds-on-rent-demystifying-misconception\/","title":{"rendered":"TDS on Rent: Demystifying Misconception"},"content":{"rendered":"\n<p class=\"has-drop-cap\">It\u2019s almost impractical to identify a home that comes with an affordable rent amount. However, if you managed to find the best deal somehow, you cannot skip unseen elements such as tax deduction. Such elements make the entire process more perplexing &amp; unnerving. The term \u201crent\u201d is unsettling for many of us since it indicates nothing but expenses. The addition of words like <a href=\"https:\/\/corpbiz.io\/tds-return-filing\"><strong>TDS<\/strong><\/a> and its computation under section194-IB causes a bit of annoyance for the general masses. But not anymore! To ensure that you do not get confused or irritated with TDS next time, we have endeavoured to provide the best possible information on the same. This write-up will talk about the TDS on Rent.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/tds-on-rent-demystifying-misconception\/#Section_194I-_TDS_on_Rent\" >Section 194I- TDS on Rent<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/tds-on-rent-demystifying-misconception\/#Definition_of_Rent_under_Income_Tax_Act\" >Definition of Rent under Income Tax Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/tds-on-rent-demystifying-misconception\/#Do_you_require_to_Deduct_TDS_on_Rent\" >Do you require to Deduct TDS on Rent?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/tds-on-rent-demystifying-misconception\/#What_is_a_legit_way_of_computing_TDS_on_Rent\" >What is a legit way of computing TDS on Rent?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/tds-on-rent-demystifying-misconception\/#Effect_of_Tax_Deduction_on_Sources_on_Tenant_Owner\" >Effect of Tax Deduction on Sources on Tenant &amp; Owner<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/tds-on-rent-demystifying-misconception\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Section_194I-_TDS_on_Rent\"><\/span>Section 194I- TDS on Rent<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Firstly, let\u2019s dive into the fundamentals of TDS under the IT Act. As per the 194-I section of the <em><strong>IT Act, 1961<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/The_Income-tax_Act,_1961\"><em><strong>[1]<\/strong><\/em><\/a><\/sup>, an individual (not being a person or HUF) entitled to paying rent is accountable for deducting 10% of the yearly rent as TDS if the annual rate surpasses INR 2.4 lakhs.&nbsp;<\/p>\n\n\n\n<p>In the\nerstwhile regime, the TDS limit for a tax deduction on the rent was capped at\nRs 1.8 lakhs. But, it was set out to Rs 2.4 lakhs in the financial year\n2019-2020.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Definition_of_Rent_under_Income_Tax_Act\"><\/span>Definition of Rent under Income Tax Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Many\nindividuals often take only house rent into account when it comes to TDS\ndeduction, which, in fact, is a wrong approach. Section 194-I provide a broad\ndefinition of rent as payment for the given things:&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"962\" height=\"504\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Definition-of-Rent-under-Income-Tax-Act.png\" alt=\"Definition of Rent under Income Tax Act\" class=\"wp-image-34405\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Definition-of-Rent-under-Income-Tax-Act.png 962w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Definition-of-Rent-under-Income-Tax-Act-300x157.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Definition-of-Rent-under-Income-Tax-Act-768x402.png 768w\" sizes=\"(max-width: 962px) 100vw, 962px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Do_you_require_to_Deduct_TDS_on_Rent\"><\/span>Do you require to Deduct TDS on Rent?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per the\nongoing tax regime, an individual who is not a person or a HUF is legally\naccountable to deduct TDS on rent of more than Rs 2.4 lakhs.&nbsp;<\/p>\n\n\n\n<p>In case you fall under the Individual or HUF category, you can deduct TDS @ 5% if the rent that you are liable to furnish surpasses Rs. 50,000\/month.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/procedure-and-due-dates-of-filing-tds\/\">TDS Returns Filing: Due Dates and Procedure for Filing <\/a><\/mark><\/p>\n\n\n\n<p>Deduction\nrate of TDS and Exceptions:&nbsp;<\/p>\n\n\n\n<p><strong><em>There are certain stipulates in which TDS is not deductible u\/s 194-I. These include:<\/em><\/strong><\/p>\n\n\n\n<ul><li>When the yearly rent sum does not surpass Rs 2.4 lakhs.<\/li><li>When the rent is made to the entities or government avenues\nwhose income rejoices exemption under clauses (20) and (20A) of Sec.10 of the\nIncome-tax Act.<\/li><li>When the tenant is a person or HUF &amp; the income from the\nprofession does not surpass Rs 50 lakh. This also applies to the event if they\noperate the business having revenue of less than Rs 1 crore during the\nfinancial year.&nbsp;<\/li><li>When there is a sharing of motion picture exhibition between the\nfilm exhibitor who owns the cinema halls and film distributor.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_legit_way_of_computing_TDS_on_Rent\"><\/span>What is a legit way of computing TDS on Rent?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Let\u2019s go\nthrough the following example to get a better understanding of TDS on\nrent.&nbsp;<\/p>\n\n\n\n<p>Rakesh pays a\nrent of Rs 41,000 to his landlord per month. Now, in the purview of the revised\nrate, Rakesh will have to deduct 7.5% of the overall amount.&nbsp;<\/p>\n\n\n\n<p><em><strong>Here\u2019s how much Rakesh will need to deduct:&nbsp;<\/strong><\/em><\/p>\n\n\n\n<ul><li>TDS on rent (Apr 2020 &amp; May 2020): INR 8,000 (<\/li><li>TDS on rent (April 2020 and May 2020):&nbsp;<strong>Rs. 8,200<\/strong>&nbsp;<em>(10% of\nthe rent for the first two months)<\/em><\/li><li>TDS on rent (June to March 2020):&nbsp;<strong>Rs. 30,750<\/strong>&nbsp;<em>(7.5% of\nthe 10 month\u2019s rent)<\/em><\/li><li>Total TDS pertaining to the financial year 20-21 will be&nbsp;<strong>Rs. 38,950&nbsp;<\/strong>(A +\nB)&nbsp;<em>(You will need to deduct Rs. 38,950 from the rent of March 2020)<\/em><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Effect_of_Tax_Deduction_on_Sources_on_Tenant_Owner\"><\/span>Effect of Tax Deduction on Sources on Tenant &amp; Owner<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>TDS on rent\nsimply reflects on the owner, income tax return, &amp; a deduction on overall\ntax liability follows: Therefore, TDS deducted by tenant minimizes the total\nincome tax liability.<\/p>\n\n\n\n<p>As a tenant,\nyou are supposed to be cautious with the deducted money &amp; ensure that this\nmoney finds its way to the revenue department. This deduction does not append\nto the taxable income. Hence there is no alteration in your tax\nliability.&nbsp;<\/p>\n\n\n\n<p><strong>Tax Saving\nOptions<\/strong><\/p>\n\n\n\n<p>TDS deduction does not affect the tax liability to a great extend. Hence, you have to look out for conventional modes of saving taxes. With legit tax planning, you can also minimize the quantum of taxes while&nbsp;boosting savings.<\/p>\n\n\n\n<p>Here are the tax-saving instruments that ensure liquidity &amp; improved returns.<\/p>\n\n\n\n<p><strong>Section 80C<\/strong><\/p>\n\n\n\n<p>It is one of\nthe most widely assessed sections to save tax. It renders a wide array of\ninvestment options. The section aims to minimize the taxable income by up to Rs\n1.5 lakhs. Some of the most effective tax-saving instruments include<\/p>\n\n\n\n<p><strong>Unit Linked Insurance Plans<\/strong>: Helps in creating\nlong-term tax-free wealth, ensuring safety to your child education goals &amp;\nmaximize your retirement corpus<\/p>\n\n\n\n<p><strong>Sukanya Sammriddhi Yojana (SSY) &amp; Public Provident Fund (PPF): Both schemes are quite popular, but serves different purposes.\u00a0<\/strong><\/p>\n\n\n\n<p><strong>National Pension Scheme (NPS)<\/strong>: Mainly renders retirement benefits and render dynamic asset allocation &amp;\u00a0Equity exposure<\/p>\n\n\n\n<p><strong>Equity Linked\nSavings Scheme (ELSS)<\/strong>: Pure equity mutual funds that come with three-year lock-in &amp;\ntax-exemption.<\/p>\n\n\n\n<p><strong><em>Some more\nsections that enable taxpayers to save additional tax:&nbsp;<\/em><\/strong><\/p>\n\n\n\n<p><strong>Section 24:<\/strong>&nbsp;Interest\npaid on a house loan up to INR 200,000. Enable taxpayer to minimize tax from\nhouse property. Hence this is a vital section if you own a let-out property.<\/p>\n\n\n\n<p><strong>Section 80E:<\/strong>&nbsp;You can\nspare tax on interest paid on a child education loan,&nbsp;<\/p>\n\n\n\n<p><strong>Section 80G:<\/strong>&nbsp;This section mitigates tax imposition on the amounts routed to charity houses or <a href=\"https:\/\/corpbiz.io\/ngo-registration\"><strong>NGOs<\/strong><\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While TDS is merely an additional transaction in your rental deal, saving taxable income is a more compelling cause for your attention. Therefore, deduct TDS or receive rent but do not forget leveraging tax-saving investments to grow your wealth.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/how-to-file-tds-return-online\/\">How to File TDS Return Online? <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s almost impractical to identify a home that comes with an affordable rent amount. However, if you managed to find the best deal somehow, you cannot skip unseen elements such as tax deduction. Such elements make the entire process more perplexing &amp; unnerving. The term \u201crent\u201d is unsettling for many of us since it indicates [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":34400,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[237],"tags":[1916],"acf":{"service_id":"90"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":3605,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34395"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=34395"}],"version-history":[{"count":31,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34395\/revisions"}],"predecessor-version":[{"id":34432,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34395\/revisions\/34432"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/34400"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=34395"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=34395"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=34395"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}