Income-Tax Act Amendments: Norms for Rental Income Deductions

As per Section 194-I of the Income-Tax Act (ITA), 1961, individuals and Hindu Undivided Families (HUFs) responsible for paying rent to a resident are mandated to follow specified tax deduction regulations.

 In this regard, the legislation outlines two distinct rates for tax deduction at source (TDS):

  • A rate of 2% is applicable for the usage of machinery, plant, or equipment.
  • A rate of 10% is applicable when it comes to the use of land, building, including land appurtenant to a building, factory building, furniture, or fittings.

However, it’s important to note that no tax deduction is required in case the aggregate rent credited or paid during the financial year is less than Rs 1.8 lakh.

In addition, individuals or HUFs with total income surpassing the monetary limits specified in Section 44AB(a) or 44AB(b) of the ITA are obligated to deduct income tax at source under this Section.

Typically, the term ‘rent’ encompasses payments made under lease, tenancy, sub-lease or any other arrangement or agreement for utilising land, land appurtenant to a building, building (including factory building), including factory building, machinery, plant, equipment, furniture, and fittings, among others.

This provision necessitates diligent adherence by entities other than individuals or HUFs, ensuring compliance with tax deduction rates and limits specified under Section 194-I of the ITA. In case of failing to do so, there could be legal implications as specified by the ITA.

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