194I TDS ON RENT

194I - TDS ON RENT

194I Of Income Tax Act deals with TDS on Rent Payments like Rent Paid for Plant and Machinery. Buildings, Furniture etc. TDS Rate Applicable on each rent payment when its crosses the threshold limit for that person in a Financial Year.

​If an Individual having business and Previous FY Gross Turnover / Sales / Receipts 
exceeds 1 crore, and if Professional 50 Lakhs Gross Receipts shall deduct the tds for rents.

​Rent on Land, Building, Plant, machinery, Equipment, Furniture, Fittings, appurtenant to 
building shall come under this 194I.

​Any Person other than an Individual, who is responsible for paying rent to a resident, shall deduct the TDS @
- 2% for Plant, Machinery or Equipment
- 10% for other rent payments like Land, Building, and Furniture

TDS Rates:
For Plant & Machinery - 2%
​For Other Rents - 10%

Threshold Limit:
up to 01-04-2025 - Rs 2,40,000 pa.
​From 01-04-2025 - Rs 50,000/pm.(6 Lakhs in FY)

NO TDS on Rent Applicable for REIT (Real Estate Investment Trust)

• TDS need to deduct on the Rent amount excluding GST.
• Lump sum lease Premium paid for acquisition– no TDS applicable

​Case 1: ABC Ltd. took on sub-lease a building from J, an individual, with effect from 1.9.2024
on a rent of 25,000 per month. It also took on hire machinery from J with effect from
1.10.2024 on hire charges of 15,000 per month. ABC Ltd. entered into two separate 
agreements with J for sub-lease of building and hiring of machinery. The rent of building and
hire charges of machinery for the financial year 2024-25 were 1,75,000 and 90,000, 
respectively, which were credited by ABC Ltd. to the account of J in its books of account on 
31.3.2025. Examine the obligation of ABC Ltd. with regard to deduction of tax at source in 
respect of the rent and hire charges.
Solution: As per section 194-I dealing with the deduction of tax at source from payment of 
rent, the rate of TDS applicable is 2% for machinery hire charges and 10% for building lease 
rent. The scope of the section includes, within its ambit, rent for machinery, plant and 
equipment. Tax is required to be deducted at source from payment of rent, by whatever 
name called, under any lease, sub -lease, tenancy or any other agreement or arrangement 
for the use of building and machinery, irrespective of whether such assets are owned or not 
by the payee.
The limit of 2,40,000 for tax deduction at source will apply to the aggregate rent of all the 
assets. Even if two separate agreements are entered into, one for sub-lease of the building 
and another for hiring of machinery, rent and hire charges under the two agreements have 
to be aggregated for the purpose of application of the threshold limit of 2,40,000. In this 
case, since the payment for rent and hire charges credited to the account of J, the payee, 
aggregates to 2,65,000 (1,75,000 + 90,000), tax is deductible at source under section 194-I. 
Tax is deductible @10% on 1,75,000 (rent of building) and @2% on 90,000 (hire charges of 
machinery)

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