TDS 194IC of Income Tax Act 1961

TDS on Payment of Rent by Individuals or Hindu undivided family [Section 194IB]:

  • The key objective of inserting this section is to curb tax evasion by landlords.
  • Section 194IB was introduced vide Finance Act, 2017 to cover expenses incurred by individual and HUF by way of payment of rent to an Indian resident.
  • The individual and HUF who are not liable to tax audit under section 44AB are covered under this section.
  • Hence, Section 194B mandates that individuals or Hindu Undivided Families to deduct TDS for rent payment made to an Indian resident subject to the threshold limits.

Meaning of Rent:

Rent means any payment made under lease or sub-lease or tenancy or any agreement for use of an immovable property. It is paid to the owner of the immovable property by the tenant or Lessee. 


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Applicability of TDS on Rent Blog post

Section 194I of the income tax covers TDS on rent. It imposes obligation for TDS deduction on persons(other than individual/HUF) making rental payments to resident Indians above a specified limit. The rent under this section broadly includes house rent, machine rent, building rent, office rent, furniture rent etc.

The Finance Act, 1994 inserted the Section 194I, regarding deduction of tax from rent. The Government introduced the provision to cover the income by way of rent under tax deduction at source.


 XBRL Reporting

XBRL (eXtensible Business Reporting Language) is a freely available and global framework for exchanging business information. XBRL allows the expression of semantic meaning commonly required in business reporting. The language is XML-based and uses the XML syntax and related XML technologies such as XML Schema, XLink, XPath, and Namespaces. One use of XBRL is to define and exchange financial information, such as a financial statement. The XBRL Specification is developed and published by XBRL International, Inc. (XII).

XBRL is a language for e-communication of financial and business data for business reporting. It is a standardized communication language in electronic form to express, report or file a financial statements by a Companies. However, XBRL is only a method of presentation or reporting. It does not attempt to make any changes in the content to be reported.


A Brief Overview of TDS under Section 194IA

We know that income tax liability arises for the seller at the time of transfer of an immovable proper subject to the provisions of capital gain tax.However, the responsibility to deduct tax and submit it with the Government lies on the buyer and not on the seller. This section deals with the liability of a buyer to deduct TDS at the time of purchase of an immovable property.

As per the provisions of Section 194IA, when a buyer buys immovable property (i.e. a building or part of a building or any land other than agricultural land) costing more than Rs 50 lakhs, he has to deduct tax at source (TDS) when he pays the seller. This section is applicable with effect from 1stJune 2013. 


A Brief Overview of TDS on Payment to Resident Contractors

It is a newly inserted section in Budget 2019 which is applicable from 1stSeptember, 2019. This section was introduced to cover some specified high value transactions of personal nature which were previously excluded from TDS provisions. The tax authorities observed that some individual and HUFs make very high payments to the professionals towards commission, contract fees or fees for rendering professional or technical services. As these individual/HUF are not subject to tax audit u/s 44AB, they are not liable to deduct TDS on such transactions; hence, the introduction of Section 194M to cover such high value transactions.


Section 43B of the Income Tax Act 1961

As per Section 43B of the income tax act, 1961 certain expenditure / payments which are otherwise eligible for deduction under the Act shall be allowed as a deduction only in the year of actual payment irrespective of the year of accrual of such expenditure. The section provides a list of such expenses allowed as deduction only on actual payment under the head ‘Income from business and profession’.

If an assessee fails to make payment of such specified expenses till the end of the relevant financial year in which such expenses were incurred, then he will not be able to claim deduction for these expenses. However, the assessee is given time to pay these amounts before he files his return of income or the due date for filing his return of income whichever is earlier. The assessee can show the proof of making such payment and claim the deduction in the same year (in which the amount was accrued).

Financial Management