Section 194-I of ITA, 1961 : Section 194-I: Rent

Explanation using Example

Let's say a software company, Tech Innovations Pvt. Ltd., rents office space in a commercial building owned by Mr. Sharma, a resident of India. The monthly rent agreed upon is ₹50,000. Over the financial year, the total rent paid would be ₹600,000. As per Section 194-I of the Income-tax Act, 1961, Tech Innovations Pvt. Ltd. is required to deduct tax at source (TDS) at the rate of 10% since the payment is for the use of land or building.

Therefore, every month when the rent is due, Tech Innovations Pvt. Ltd. should deduct ₹5,000 (10% of ₹50,000) and pay Mr. Sharma ₹45,000. The deducted TDS of ₹5,000 should be deposited with the government on behalf of Mr. Sharma.

In this scenario, Tech Innovations Pvt. Ltd. is not an individual or Hindu undivided family and the rent exceeds the threshold of ₹240,000 for the financial year, making the company liable to deduct TDS under Section 194-I.