These consist of pay, commission, professional costs, rent, and commission. Depending on which occurs first, the tax is subtracted either when funds are credited to the payee’s account or when the payment is made. In this post, we examine the numerous facets of TDS returns. If you require any assistance with filling out your TDS, please contact a legal advisor at Legalraasta.

What is TDS Return?

The regulation method of tax collection known as “Tax Deducted at Source,” or TDS, entails the deduction of tax from an individual’s taxable income by the party disbursing the funds before the tax is deposited with the government. Let’s imagine B is the landlord who receives the rental income and A is a tenant in a rented unit. And in accordance B must pay income tax on the rent received.

However, in accordance with the TDS return guidelines, A must deduct the tax from the rent at the rate provided by the Income Tax Act and pay the government instead of B paying the tax directly. With a third party in charge of tax payment, this arrangement helps prevent tax evasion since if the third party forgets to withhold taxes, they will be liable for paying the taxes themselves.

In this arrangement, there are currently three parties. The first is the party who withholds the tax from the sum that must be paid before doing so. The individual from whose income the tax was withheld is the next factor and known as the deductee. The government is the third and final entity, with whom the deductor will deposit the tax refund.

TDS return with Legalraasta

Filing a TDS Return refers to the process where the deductor deposits the money. When depositing the money, the deductor must complete a form with the required information and submit it with the tax withheld. But what if someone finds that the information that has been filed contains an error?

To update your TDS returns, you’ll need the consolidated file and justification report. The justification report details errors in the submitted TDS return, whereas the consolidated file, commonly known as the conso file, contains information on deductions made for a certain quarter. After obtaining both files, follow the instructions to modify TDS returns on Legalraasta.

The 7th of January, 7th of April, 7th of July, and 7th of October are the deadlines for submitting quarterly TDS reports for FY 2022–23.

Types of errors

Only the seven sorts of errors that the Income Tax Department recognizes as acceptable errors may be rectified. These are the mistakes:

1. C1 Type: Errors fall under this category when they pertain to the assessee’s personal information.
2. C2 type: Errors in the assessee’s challan information.
3. C3 type Errors in the assessment or deductee’s specifics are classified as belonging.
4. C4 Type: This modification involves adding and removing all of the assessee’s wage detail data. The C4 type of correction includes this kind.
5. C5 Type: Errors in the assessor’s or deductor’s PAN information are categorized.
6. C9 Type: Contrary to the other types of errors, which deal with errors of commission, this type of error deals with errors of omission. Under this category, challans that were overlooked when filing TDS returns can be added to the return and corrected.
7. Y Type: The cancellation of an accepted statement is related to the Y type of correction. It is important to file a new regular TDS/TCS statement.

How to file a corrected TDS return?

1. Logging into your TRACES (TDS Reconciliation Analysis and Correction Enabling System) account is the initial step. You will be required to sign up as a taxpayer or a deductor. Decide to sign up as a deductor.
2. After logging in, your home screen will be displayed. Statements / Payments will be an option under the main menu. Just click it. There will be a submenu.
3. You will be taken to a screen where you must select the form type that needs to be updated, the return’s quarter, and the financial year. Select the appropriate choices, then click “Go.”
4. You must now complete a KYC certification. You will be given two choices. One option is to use a DSC, in which case you merely need to affix your digital signature in the relevant area. The alternative is to proceed without providing your KYC, in which case you would be required to input information such the challan’s token number and AY. Give the information requested, then move on.
5. Once all of the KYC details have been verified, you will be directed to the next page.
6. A notice box stating that the conso file is now available for download will appear.
7. Visit “Downloads > Requested downloads” page.
8. Type in the assigned request number. You can download the file if the request status is “Available.”
9. After confirming the form, you can now make any necessary changes to the details and submit it.

Conclusion

The general process for amending a TDS return has been attempted to describe in this article. The process is actually far more intricate, technical, and thorough. To revise a return accurately and without mistakes, one would need to have information and experience from personal experience.

Therefore, it is usually essential to consult an expert for advice while handling such issues. Contact us right away if you have any questions about your TDS returns or need assistance with submitting or updating them, and one of our tax professionals will reach out to you to better understand your needs and provide assistance.

The post How to File a Revised TDS Return? appeared first on LegalRaasta Knowledge portal.

How to file online TDS return: A step-by-step guide

All individuals and businesses in India are required to pay income taxes. Income tax is a mandatory payment made on earnings from various sources during a fiscal year. The government’s tax revenue is spent in India on human capital, infrastructure development, defense, disaster management, and other public services. As a result, the government relies on income tax collection to continue operating and ensuring the country’s overall development. As a result, in order to avoid unnecessary harassment, every responsible citizen of the country must comply with their duty to file income tax returns on time. Filing tax returns can also be a complicated affair. The Income Tax department introduced the concept of Tax Deducted at Source, or TDS, to simplify the entire process.

What is TDS?

The Tax Deducted at Source (TDS) process collects taxes from the source from which individuals earn. The process allows the person who is supposed to pay others for their work to deduct a portion of that payment in the form of tax and remit the same amount to the Central Government’s account. The person or organization performing the deduction process is known as the ‘Deductor,’ and the person receiving the deducted amount is known as the ‘Deductee.’ By law, TDS is a method of dividing the payment amount between the claimant and the government. After the deduction, the deductor must issue a TDS certificate. As a result, the deductee will receive credit for the amount deducted based on Form 26AS for TDS certificate. TDS returns, in other words, are quarterly statements that must be submitted to the IT department. Deductors must file a TDS with their professional return.

How to file TDS returns online?

Some taxpayers find it difficult to navigate and upload a TDS return on the portal, and it is time-consuming to comply with the data procedure. To make the process easier, the IT department has started the TDS return process online, where the return can be uploaded. The deducted amount can be deposited in the central government’s account either electronically or physically. All corporate assesses and other assesses are subject to electronic payment under section 44AB of the Income Tax Act of 1961. The Challan 281 is provided to authorize banks for physical mode submission. In such a case, the treasury officer or disbursing officer assisting the deductor in depositing the deducted amount will be responsible for crediting the amount to the Central Government’s account.

What is the process for filing a TDS returns online?

1) Before uploading the TDS return, the following requirements must be met.

• You must have a valid TAN that is registered.
• TDS statements [1] should be created with Return Preparation Utility (RPU) and validated with File Validation Utility (FVU).
• If you want to upload them using DSC, you must have a valid DSC registered for e-filing.
• If you want to upload it using EVC, provide the principal contact’s bank account or demat account details, or link the principal contact’s PAN and Aadhar.

2) The following is a guide to uploading TDS statements to the IT website:

Step-1: Go to the Income Tax PAN Services Unit’s official website, http://incometaxindiaefiling.gov.in/, and click on ‘Login Here.’

Step 2: Enter your login information and click the ‘Login’ button.

Step 3: After logging in, go to the TDS tab and select the ‘Upload TDS’ option.

Step 4: You will be given a form to complete with the required information before pressing the Validate button.

Step 5: The returns can be validated using any of the following methods:

Step 5a: Using a Digital Signature Certificate, upload the TDS statements (DSC).Upload the TDS zip file first, then attach the digital signature file, and finally click Upload. Once completed, a success message will appear on the screen, and you will receive a confirmation email to your email address.

Step 5b: Verify with an Electronic Verification Code (EVC).If you did not generate a DSC, you will be able to validate the TDS statements using an electronic verification code after the fourth step (EVC). Upload the TDS zip file and click ‘Click here to E-verify’ to see if an EVC has already been generated or to generate a new EVC. Choose an option, enter the EVC, and click the ‘Submit’ button.

What is the eligibility criteria for TDS Return?

Employers who have a valid Tax Deduction Account Number can file a TDS return (TAN). Any person making the following payments, as defined by the IT Act, is required to deduct tax at source and deposit it within the time limit:

• Salary Income Paid by “Income on Securities”

Income from lotteries, puzzles, and other games

LEGALRAASTA

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TDS (tax deduction at source) has shown to be a highly effective method of collecting taxes in the country by focusing on the source of income. It also makes it easier for people to pay their taxes when it comes time to file their tax returns. This is because they are given credit for taxes deducted at the source.

Professional fees, often known as fees for technical services, are one of the most important and typical types of payments made by a business. Professional fees include those paid to a lawyer, doctor, engineer, architect, chartered accountant, interior decorator, and others. Technological services include management, technical, and consulting services, for example. Payments made to residents are covered by Section 194J.

Payments that are covered by Section 194J

Individuals should deduct TDS at a rate of 10% when making the following payments to residents in a fiscal year (above Rs.30,000):

• The amount charged as a fee for professional services
• Amount charged as a service fee for technical assistance
• • Non-compete fee under Section 28(VA) of the Internal Revenue Code

Services for Professionals

• It refers to a medical, architectural, legal, medical, or engineering professional’s services. Additional services include accounting, interior design, advertising, technical consultation, and any other profession recognised by the Board under Section 44AA.
• Other services covered by Section 44AA include film artists, business secretaries, and authorised representatives, as well as athletes, event organizers, commentators, anchors, umpires and referees, coaches and trainers, physiotherapists, team physicians, and sports columnists.

Technical Support

It is a term that describes a person’s consulting, technical, or managerial services.

Because the income from assembly, mining, and building would be included in the recipient’s head salary, they are not considered technical services.

Fees for non-competition

The amount paid in cash or in kind in exchange for an agreement prohibiting the person from sharing any patent, licence, franchise, trademark, know-how, commercial or business rights, technique, or information that could be used elsewhere for manufacturing, processing, or any other provisional service is referred to as non-compete fees for Section 194J.

Royalty

A royalty is a payment made in exchange for

• the sale of an invention, a secret formula, a model, a design, a trademark, or a patent.
• Making use of a new idea, a prototype, a patent, and so forth.
• Disseminating information about how to use an invention, patent, recipe, or other such object.
• The right to utilize the equipment for industrial, scientific, or commercial purposes.
• There will be no monetary compensation for the sale, presentation, or distribution of literary works, scientific findings, films, or videotapes for radio broadcasting.

Cases in Point

TDS deductions are also available under Section 194J, as established by the department’s case laws and circulars:

• Hospitalized medical care is available.
• Professional fees are charged by advertising companies to film artists.
• Amount paid to HR consulting agencies and recruitment firms.
• Companies pay registrants for their information.

Section 194J on TDS Highlights

• Under Section 194J, the maximum limit is Rs.30,000, which applies to each item or payment separately.
• Commissions, remuneration, or fees paid to a company’s director are subject to TDS under this section, even if the amount is not included in the primary salary. In other cases, the Rs.30,000 restriction does not apply.

Obtaining TDS at a Reduced Cost

According to Section 197, the person receiving payment can request a lower TDS rate by filling out Form 13 and mailing it to the assessing officer.

If the officer accepts, the assessee receives a certificate confirming a TDS deduction.

Section 194J establishes a time limit for depositing TDS.

The following is the time limit for filing TDS under this section:

• If the government, or someone acting on its behalf, deducts TDS under Section 194J, the deposit must be made on the same day.
• In other cases, TDS can be deposited a week after the tax deduction is made at the end of the month.
• If the payment is made on the last day of the fiscal year, the TDS deposit must be made within two months of the payment’s conclusion.
• Some unique circumstances may be allowed to deduct TDS every quarter if the assessing officer approves.

Limit on how much tax can be deducted

Tax must be deducted if the amount exceeds Rs. 30,000 during the year. Payments to a director, on the other hand, are exempt from the rule. The tax must be deducted, no matter how small the amount.

Those who are required to deduct taxes

Everyone who makes a payment in the form of fees for professional or technical services is required to deduct tax at source, with the following exceptions:

• If the previous financial year’s turnover was less than Rs. 1 crore for a sole proprietorship or a HUF.
• In the case of a sole proprietorship or a HUF with a previous financial year turnover of less than Rs. 50 lakh.

To put it another way, all entities (excluding individuals and HUFs who were not audited the previous year) are required to deduct tax.

Rate of Tax Deduction Under Section 194J

• On any payment made under this provision, TDS will be deducted at a rate of 10%.
• Beginning April 1, 2020, payments for technical support fees will be subject to a 2% TDS surcharge.
• Beginning April 1, 2017, a reduced rate of 2% will be deducted from compensation made to call centre operators.
• If the payee fails to submit his PAN, a 20 percent deduction will be applied.

Deduction Period Under Section 194J

The tax should be deducted at the point of sale.

• Entering such a transaction in the books of accounts; or

• Making a complete payment for the expense.

Whichever comes first is the winner.

Services for Professionals and Technicians Examples of TDS

Mr. Jay used Mr. Veer’s professional services in fiscal year 2021-22. The first payment was made in April for Rs. 55000, and the second payment was made in December for Rs. 22000. Let’s take a look at the TDS obligation in three distinct scenarios for FY 2021-22:

1. Under section 44AB, Mr. Jay is exempt from audit.
2. Mr. Jay is the subject of a section 44AB audit because he used the service for personal advantage.
3. In the fiscal year 2021-22, Mr. Jay is subject to a tax audit under section 44AB, and he has hired a professional for business purposes.

Case 1

Mr. Jay is not compelled to withhold tax from Mr. Veer’s payment since he is not subject to a tax audit under Section 44AB.

Case 2

Mr. Jay did do some professional work as a volunteer, but it was for personal reasons. As a result, there is no need to deduct TDS when paying for such services.

Case 3

If Mr. Jay is the subject of a Tax Audit and he uses professional services for commercial purposes, TDS of 10% at the rate of Rs. 55,000 must be deducted at the time of payment or crediting the accounts, whichever comes first. The reason for this is that the transaction exceeded the Rs. 30,000 threshold.

Similarly, because the transaction amount in the financial year exceeded the threshold limit, TDS should be withheld from all payments made to Mr. Veer. As a result, tax on the second payment of Rs. 22,000 would likewise be deducted at source.

Consequences of not deducting or deducting late

There are two implications of failing to deduct the tax or deducting the tax late:

• Disallowance of a portion of the expenditure: 30 percent of the expenditure is rejected in the year in which it is claimed (added to the profit and loss account); nevertheless, the 30 percent denied is re-allowed in the year in which the TDS is paid to the government.

• Interest levy till payment date: If the tax is not paid on time, interest, as well as TDS, must be paid to the government. The interest rate is calculated using the following formula:

• If no tax deduction has been made, interest will be levied at 1% each month/part of month from the due date of the tax until the due date of the tax deduction.

• Where tax has been deducted but not paid to the government, interest at the rate of 1.5 percent per month/part of the month will be charged from the date the tax was deducted to the date the tax was paid to the government.

The deadline for filing a tax return has passed.

Frequently Asked Questions

What is the best way to figure out how much tax I’ve deducted under section 194J?

Form 16 from the deductor or Form 26AS from TRACES or the income tax filing website can be used to examine your TDS details.

Is section 194J applicable to the payment of a company’s director’s remuneration?

The company’s director provides management services. As a result, any payment due or received to the director in the form of sitting fees, remuneration, or any other item (other than a salary) will be subject to the restrictions of section 194J. Technical service costs are subject to a 2% TDS since managerial services are technological in nature.

Professional services were valued Rs. 10,000 for the first time in a financial year, and Rs. 50,000 for the second. How much TDS should be deducted if the transaction amount exceeds the threshold limit?

Because the limit was not exceeded for the first time, no TDS should be deducted at Rs. 10,000. However, the transaction value exceeds the Rs. 30,000 threshold limit while making a second payment (for professional services). As a result, TDS on the full sum of Rs. 60,000 will be deducted at a rate of 10%.

Read, also: Section 194I- TDS on Rent
Section 194A TDS on Interest apart from Interest on Securities

The post Section 194J – TDS on Professional/Technical Fees appeared first on LegalRaasta Knowledge portal.

• 194M – TDS on payment to resident contractors and professionals
• 194N – TDS on cash withdrawal in excess of Rs 1 crore

What is Section 194M?

Section 194M requires an individual and/or a Hindu undivided family (HUF) to deduct tax at source. Individuals and HUFs in this situation should not be obligated to have their records audited. If a business’s total sales or receipts reach Rs. 1 crore, or if a profession’s receipts exceed Rs. 50 lakh, the books of accounts must be audited. It is applicable when the total amount paid to a resident individual in a financial year for performing any contractual work or delivering any professional service exceeds Rs 50,00,000.

TDS deduction is applicable if they are compelled to have their books of accounts audited under Section 194C and 194J. Individuals and HUFs who are required to deduct TDS under Sections 194C (payment to a contractor) and 194J (payment on professional fees) are exempt from deducting tax at source under Section 194M.

Individuals or HUFs who are required to deduct tax can pay it to the government using merely their PAN. It is not necessary to obtain a tax deduction account number (TAN) in order to deduct TDS. This clause does not apply to payments made to non-residents.

Reason for the introduction of Section 194M

The Finance Bill of 2019 includes Section 194M, which provides for a tax deduction at source on any money paid by an individual or HUF to a resident contractor for personal use. As a result, this section applies to both personal and business payments. In the situation described above, a person or HUF had no obligation to deduct tax at source prior to the establishment of this section.

Individuals or HUFs engaging on a business or profession (who were not audited) were also not deducting any tax at source, even when the payment was made for the sake of their business or profession. Because to this exemption, a significant portion of payments for contractual work and professional fees were excluded from TDS, allowing for tax fraud.

What does ‘work,’ ‘contract,’ and ‘professional services’ mean in Section 194M?

1.Work: In this section, the term “work” refers to the following:

• Advertising
• Broadcasting and telecasting, as well as the development of programming for such broadcasting or telecasting, are all included.
• Other than trains, any means of transportation can be used to convey commodities and passengers.
• Catering.
• Manufacturing or supplying a product in accordance with a customer’s request or specification utilising materials obtained from that customer. However, making or supplying a product to a customer’s requirements or specifications using material purchased from someone other than the customer is not included.

2.Services provided by professionals: The following are examples of professional services in this section:

• Fees for professionals
• Technical service charges
• Directors’ remuneration, excluding salary (For example, sitting fees to attend board meetings)
• Royalty
• Non-compete fees (costs paid to refrain from carrying on a business or profession for a set period of time and within particular geographic borders) or fees paid to refrain from sharing technical knowledge or know-how.

Who is responsible for deducting TDS under section 194M?

Under 194M, a person who is an individual or a HUF and needs to pay a resident for contract work performed or any professional service provided must deduct tax at source.

According to the Union Budget 2019, any individual or HUF paying a resident a sum exceeding Rs 50,00,000 in a year for carrying out any work (including the supply of labour) under any contract or by way of fees for professional services rendered during the financial year must deduct TDS at a rate of 5%. From May 14, 2020, through March 31, 2021, the TDS rate will be 3.75 percent. This clause will go into effect on September 1, 2019. Any payment made after this date, even if the contract existed previously, will be subject to TDS if the sum exceeds Rs 50,00,000.

When is it possible to deduct tax at source under Section 194M?

On the earlier of the following dates, TDS will be deducted:

• At the time the amount is credited.
• At the time of cash payment or the issuance of a check or draught.

Rate of TDS under section 194M

TDS at 5% under Section 194M TDS at 5% shall be deducted under 194M if the total amount paid to a resident in a financial year exceeds Rs 50,00,000. For transactions between 14 May 2020 and 31 March 2021, the TDS rate is 3.75 percent.

If the deductee’s PAN is not provided, TDS will be deducted at a rate of 20%.

What is the time limit on depositing TDS?

1. When the government makes a payment, the TDS amount must be paid to the department on the same day as the payment is made.
2. Where a payment is paid by someone other than the government:

TDS should be paid in the challan cum statement Form 26QD as follows:

• If the amount is deducted in March, it must be paid by April 30th of the next fiscal year. If the sum was deducted in March 2020, for example, the TDS will be deposited to the department by April 30, 2020.
• Within seven days of the end of the month in which the tax deduction is made in any other month. If the sum was deducted and paid in September 2019, for example, the TDS will be remitted to the department by October 7, 2019.

Certificate of Tax Deducted Under Section 194M

Within 15 days of the due date of furnishing the challan cum statement in Form 26QD, the person who deducts tax under section 194M must provide the payee with a certificate in Form no. 16D.

Also read

Section 194C- TDS (Tax Deducted at Source) on Payment to Contractors

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It is the payer’s responsibility to deduct tax (TDS/TCS) and pay it to the government’s credit. Obtaining a Tax Deduction Account Number (TAN) is required for such a tax deduction. Deductors must additionally file a Tax Deduction at Source (TDS) return for each quarter of the financial year, detailing the deductees, nature of the payment, tax deducted, the rate at which it is deducted, and so on. The TDS returns were filed to make it easier for the IRS to credit TDS to the correct deductees.

In addition to submitting returns, the deductor must supply the deductee with a TDS certificate for the tax deducted. Form 16B is one of the TDS certifications that the deductor is required to issue to the deductee under the Income-tax Act of 1961 in respect of TDS deposited with the government. The provisions relevant to Form 16B have been examined in this article under the following primary headings:

Nature of tax deduction and the person responsible to deduct tax

• The following are the provisions of this section:
• There is a transfer of immovable property (except in circumstances of compulsory acquisition).
• The term “immovable property” refers to land, buildings, and parts of buildings that are not agricultural land*.
• The buyer is responsible for paying the resident seller consideration for such a transfer.
• The transfer is for a sum of Rs 50 lakhs or more.
• At the time of credit or payment, the buyer must deduct tax at a rate of 1% of the consideration.
• If the vendor does not furnish a PAN, TDS will be deducted at a rate of 20% as per Section 206AA.

Form 26QB and Form 16B

For tax deducted under Section 194-IA, Form 26QB is a return cum challan for payment of TDS to the government that must be submitted electronically.

the deadline

Within 30 days of the end of the month in which the deduction is made, Form 26QB must be submitted. For example, if payment/credit is made on April 16th, Form 26QB must be submitted by May 30th.

Installments

Because TDS is required for each installment, Form 26QB must be provided for each such deduction in the case of payment/credit in installments.

A transaction involving multiple parties

For each buyer and seller combination, a Form 26QB must be submitted.

Example 1: If there is only one buyer, B1, and two sellers, S1 and S2, Form 26QB must be filed separately for the B1 and S1 combination and the B1 and S2 combination, totaling two 26QBs.

Example 2: If a second buyer, B2, is added to the above example, Form 26QB must be filed separately for B1 and S1 combination, B1 and S2 combination, B2 and S1 combination, and B2 and S2 combination, totaling 4 26QB.

What if the payer does not possess TAN?

As previously stated, all deductors must obtain a TAN in order to deduct TDS and pay it to the government. All communications with the Income-tax (TDS) department must additionally include the TAN. TDS must be paid using the ITNS 281 challan number. Individuals may be parties to immovable property transfer transactions in most situations, and they are unable to use Challan No. ITNS 281 without a TAN, and getting a TAN for a one-time transaction is not practicable.

As a result, deductors covered by Section 194-IA have an exception and can file TDS returns without a TAN, and a separate Return cum Challan Form 26QB has been created to make it easier for deductors without a TAN to file TDS returns under Section 194-IA.

Form 26AS – It takes 7 days for the tax credit to reflect on the seller’s Form 26AS after TDS payment.

The due date for issuance of Form 16B

Within 15 days of the due date for submitting Form 26QB, the deductor must issue Form 16B to the payee, and Form 16B can be prepared and downloaded via TRACES – TDS Reconciliation and Analysis and Correction Enabling System. For example, if the due date for Form 26QB is June 14th, Form 16B will be issued on June 14th.

Procedure to generate and download Form16B from TRACES

• To register as a taxpayer on TRACES, enter your PAN and either the amount of tax deducted, the details of the challan, or the details of Form 26QB. Also, click ‘Proceed’ after entering the verification code. • If already registered, log in to TRACES with username ‘PAN’ and password ‘TRACES’.
• Select ‘Form 16B (For Buyer)’ from the downloads menu.
• Provide information such as the assessment year, the Form 26QB acknowledgment number, and the seller’s PAN. • Form 16B is now available in the requested downloads section under the Downloads category.

Related Blogs –

PF Transfer Form – Form 13

Form 12B: A Complete Guide

Form 38 – A mandatory document for trading

The post Form 16B – TDS Certificate for Sale of Property – Download from Traces appeared first on LegalRaasta Knowledge portal.

What is the rationale behind the introduction of TDS under Section 194I?

The Finance Act of 1994 added Section 194I, which deals with tax deductions from rent. The government enacted a provision that allows rent revenue to be covered by a tax deduction at the source. Such income is subject to income tax deductions at source in other countries as well.

What is TDS on rent?

A person who pays rent is subject to a tax deduction at source under Section 194I. TDS can be deducted if the total amount of tax to be paid or received in a fiscal year is more than Rs. 1,80,000. The limit has been raised from Rs. 1,80,000 to Rs. 2,40,000 for the fiscal year 2019-2020. Furthermore, until the rent exceeds Rs. 1 crore, there is no surcharge.

When the rent is higher than Rs. 50000, HUFs and individuals are usually required to pay TDS at a rate of 5% of the total rent received. It is important to highlight that rent paid to government agencies or organizations is not subject to TDS.

Who is eligible for TDS deductions under Section 194I?

TDS can be deducted by entities that are responsible for paying, have credited, or will be credited a total rent of Rs. 1.80 lakh to their landlord in a fiscal year. Such entities, however, cannot be a HUF or an individual.

Which payments are subject to TDS under Section 194I?

It’s worth noting that there are some situations when the income isn’t necessarily rent, but nonetheless falls under Section 194I.

Section 194I of the Income Tax Act  covers the following sources of income:

• Renting out factory premises brings in money.
• Payments made to hotels.
• Payments  made to cold storage facilities
• The association is responsible for paying the hall’s rent.
• Service charges made to business centers.
• Rent on furniture and structures.

It is important to note that TDS must be deducted on the basis of the rental period and each month under Section 194I. Naturally, if rent is paid yearly or quarterly, it will be distributed in the same manner.

However, there are a few instances where no tax is deducted at source under ITA Section 194I. Those exceptions must be recognized and the process streamlined accordingly.

Exemptions and Deductions at Lower Rates (Section 194I)

The following situations are exempt from TDS on rent:

• When the amount to be paid or has been paid in a fiscal year is less than Rs. 180000.
• The rent is then paid to a government entity.
• When a film exhibitor and distributor who own a cinema theatre split the profits.
• In case if it is an individual tenant or HUF,

TDS without service tax 

TDS is subject to service tax only if the total rent from one or more sources in a fiscal year exceeds Rs.10 lakh. In an ideal world, service tax would include cess.

It’s important to remember that service tax is computed on the amount of rent owed, not on the amount of service tax paid.

Nil or lower tax deduction

Entities with a nil or minimal TDS deduction might file Form 15G  or 15H to avoid TDS on rent if people with no tax receive rent as income.

Entities can claim TDS refunds in addition to these when filing ITRs. To do so, the taxpayer must claim tax deducted at source as credit and pay the difference between the tax due and the rent deduction.

Tax Deducted at Source on Advance Rent

The payment of advance rent to the landlord is subject to TDS deduction. Regardless, a few exclusions are taken into account while calculating TDS, as detailed below —

• If the advance rent is carried over to the next fiscal year, the tax deducted at source will be proportional to earnings, as calculated by Form 16 for aggregate rent paid in advance.
• When an asset is sold or transferred to another person, the tax credit deducted at the source is not available until the transfer is credited to the new owner.
• The remainder will be repaid to renters if the rent arrangement is canceled after the advance rent has been paid and TDS has been deducted. The landowner must specifically specify the cancellation in the ITR form for TDS deduction.
• A TDS certificate, in the form of Form 16A, must be produced every quarter for payments other than salary.

Implications of Failure to Pay TDS Under Section 194I of the Income Tax Act

Taxpayers who fail to pay their taxes by the due date are subject to a 1% interest penalty. It is important to note that taxpayers must pay interest every month from the date on which tax is to be deducted until the date on which it is actually deducted.

Taxpayers who deduct but do not deposit their money with the government are required to pay interest at a rate of 1.5 percent. However, from the date of tax-deductible until TDS is submitted, such interest must be paid.

What is the TDS Deposit Time Limit?

In various circumstances, these pointers underline the time restriction for TDS deposit.

When TDS is paid on behalf of the government or by the government, the payment must be done on the same day without the use of a challan form.

When TDS is paid by a non-government entity, it must be paid on or within a week of the end of the month in which a deduction will be made.

Also, read

Rent Control Act – Rental Agreement, Rights of Tenant & Landlord

Section 194C- TDS (Tax Deducted at Source) on Payment to Contractors

How to file TDS on sale of property?

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