Tax Deduction at Source

Section 194 - I - Rent

▪ Threshold limit for deduction of tax at source – > Rs. 2,40,000 in a financial year

▪ Payer - Any person (Excludes - an individual or HUF who are not covered u/s

44AB) responsible for paying rent

▪ Payee - Any resident

▪ Rate of TDS -

➢ P &M / equipment 2%

➢ Land / building, furniture/fittings-10%

▪ Time of deduction - At the time of credit or at the time of payment - Whichever is

earlier

Section 194 - IB - Payment of Rent by certain Individuals or HUF

i. Threshold limit for deduction of tax at source - > Rs. 50,000 for a month or part

of a month

ii. Payer - Individual/ HUF (Other than the those covered u/s 194 I above)

responsible for paying rent.

iii. Payee - Any Resident

iv. Rate of TDS - 5%

v. Time of deduction - At the time of credit of rent, for the last month of the

previous year or the last month of tenancy (if the property is vacated during

the year), to the account of the payee or at the time of payment - whichever is

earlier.
Additional Points
If PAN is not provided by the deductee to the deductor tax shall be deducted at a

higher rate (i.e., higher of the rate provided in the relevant section, rates in force and

20%).

Such deduction shall not exceed the amount of rent payable for the last month of

the previous year or the last month of the tenancy.

Question 7
Mr. X, a salaried individual, pays rent of Rs.55,000 per month to Mr. Y from June 2019.

Is he required to deduct tax at source? If so, when is he required to deduct tax? Also,

compute the amount of tax to be deducted at source.

Would your answer change if Mr. X vacated the premises on 31st December 2019?

Also, what would be your answer if Mr. Y does not provide his PAN to Mr. X?

Solution
1. June – March

55,000 x 10

= 5,50,000 x 5%

= 27,500/-

March = 55,000 – 27,500 = 27,500/-

2. June – December

55,000 x 7

= 3,85,000 x 5%

= 19,250/-

December = 55,000 – 19,250 = 35,750/-

3. June – March

55,000 x 10

= 5,50,000 x 20%

= 1,10,000/-

December = 55,000 – 55,000 = 0/-

Section 194 - IA - Payment on Transfer of certain Immovable

Property Other than Agricultural Land

➢ Threshold limit for deduction of tax at source - ≥ Rs. 50, 00,000 (Consideration

for transfer)

➢ Payer – Any person being a transferee (other than a person referred to in

section 194 LA responsible for paying compensation for compulsory

acquisition of immovable property)

➢ Payee – Any Resident

➢ Rate of TDS - 1%

➢ Time of deduction - At the time of credit or at the time of payment - Whichever

is earlier

Question 8
Mr. X sold his house property in Bangalore as well as his rural agricultural land for a

consideration of Rs. 60 lakhs and Rs. 15 lakhs, respectively, to Mr. Y on 1.8.2019.

He has purchased the house property and the land in the year 2018 for Rs. 40 lakhs

and Rs. 10 lakhs, respectively.

The stamp duty value on the date of transfer, i.e., 1.8.2019, is Rs. 85 lakhs and Rs. 20

lakhs for the house property and rural agricultural land, respectively.
Examine the tax implications in the hands of Mr. X and Mr. Y and the TDS

implications, if any, in the hands of Mr. Y, assuming that both Mr. X and Mr. Y are

resident Indians.

Solution
Mr. X
Consideration 85L
(-) COA (40L)
45L

Mr. Y
SDV 85L 50,000
AC 60 L 3,00,000
IFOS 25L
194 IA = 60L * 1% 60,000

Prepared By: CA DEVICHARAN PRABHU