As per section 194I
TDS is to be deducted on Rent at 10% in case of Land and Building and Furniture and 2% on Plant and Machinery
However,No TDS is to be deducted if annual rent is upto 240000 per annum. If rent is 240001 then TDS is deducted.
|
Section Name |
Description |
Cutoff |
||
|
194 I |
Rent |
180000 P.A 240000 P.A. (From 1 April 2019) |
Land and Building Furniture |
10% |
|
Generator rent, machinery hire charges |
2% |
|||
Changes in 194I Due to Lockdown
However,Due to Lockdown,Government has temporarily reduced Rate by 25%
hence,TDS Rate on Rent Service is Changed as follows
| Current Rate | New Rate (Temporary) | ||||||||||||
| TDS on Rent | Land and Building, Furniture | 10% | 10%*75%=7.5% | ||||||||||
| Generator rent, Machinery hire charges | 2% | 2%*75%=1.5% | |||||||||||
Note - This New Rate is Temporary only if TDS Deducted form 14 May 2020 to 31 Mar 2021
After this old Rate will be applicable
Whether TDS to be deducted in following cases
1 Office Rent paid 10000 p.m to A ltd
View answer
Total Rent paid during year =10000*12=120000
No TDS to be deducted as Total rent paid during year is not more than 240000
2 Office Rent paid 20000 p.m to A ltd
View answer
Total Rent paid during year =20000*12=240000
No TDS to be deducted as Total rent paid during year is not more than 240000
3 Office Rent paid 25000 p.m to A ltd
View answer
Total Rent paid during year =25000*12=300000
Since it is more than 240000,TDS is to be deducted on whole amount 300000 and not excess amount
TDS Rate is 10% as it is office rent i.e. Rent for Land and Building
However, right now TDS is to be deducted @ 10% on 25000 p.m i.e. 2500
4 Office Rent paid 25000 p.m to A ltd, Rent Agreement starts from 1 December
View answer
Total Rent paid from Dec- March during year =25000*4=100000
No TDS to be deducted as Total rent paid during year is not more than 300000
However from next year onwards, TDS is to be deducted
5 Office Rent paid 25000 p.m , Rent Agreement starts from 1 April.However Rent is paid to 2 parties Mr A and Mrs A
View answer
Total Rent paid during year =25000*12=300000
Rent paid to One person=300000/2=150000
No TDS to be deducted as Total rent paid during year is not more than 240000
6. Rent paid for Office 15000 pm,4000 pm for AC and 2000 for Furniture to A ltd
View answer
Total Rent paid per month=15000+4000+2000=21000 p.m
Total Rent paid during year =21000*12=252000
Since it is more than 240000, TDS is to be deducted
TDS Rate is 10% on Office and Furniture
and 2% on AC
Total TDS per month =
=10%*17000+2%*4000
=1700+80
=1780
QUESTIONS
Q1.
Office taken on rent from DLF @50000pm. from 1 April onwards
As per agreement one month rent and 2 month security deposit given to DLF by cheque
View answer
Rent paid from April to March
= 50000 ×12 [April − March]
= 600000
Since rent paid is more than 240000
TDS to be deducted
However No TDS on security deposit as it is not an expense
Entries
Rent exp Dr. 50000
To DLF 45000
To TDS 194 I Co. 5000
Security deposit Dr. 100000
To DLF 100000
DLF Dr. 145000
To Bank 145000
Q2.
Suppose in Q1 rent agreement Started from 1 Jan instead of 1 April
View answer
Rent paid during year = 50000 ×3 [Jan − March]
= 150000
Since rent paid is less than 240000 No TDS to be deducted
However from next year (April Onwards) TDS will be deducted
Entries
Rent Dr. 50000
To DLF 50000
Security deposit Dr. 100000
To DLF 100000
DLF Dr. 150000
To bank 150000
Q3 .
Guest house taken on rent @ 25000 pm. From 1 June onwards
Guest house co-owned by Rajesh khoslaand Shalinikhosla.
View answer
Rent paid during year = 25000 ×10
= 250000
|
If Rent paid to one |
If Rent paid to both |
|
Rent paid = 250000 Since it is more than 240000 TDS is applicable. |
Rent paid to each = 250000/2 = 125000 Since rent paid is less than 240000 no TDS |
Q4.
Guest house taken on rent @ 100000 pm. As per agreement 2 month rent and 3 month security deposit payable to Mr. Ajay Verma
View answer
TDS will be deducted on 2 months rent
= 200000 ×10%
= 20000
However as per accounts one month rent is expense and remaining one month is prepaid.
Entry
Rent exp Dr. 100000
Prepaid rent Dr. 100000
To Ajay Verma 180000
To TDS(194 I) Non Co. 20000
Security Deposit Dr. 300000
To Ajay Verma 300000
Ajay Verma Dr. 480000
To Bank 480000
Entry next month
Rent exp Dr. 100000
To prepaid rent 100000
[No TDS next month as TDS already deducted]
Q5 .
Generator taken on rent at annual rent of Rs. 60000 from Tarang Electrical's
View answer
Since rent paid is less than 240000
No TDS
Entry
Rent exp Dr. 5000
Prepaid rent D. 55000
To Tarang 60000
[One month rent booked and 11 month prepaid booked]
Tarang Dr. 60000
To bank 60000
Entry next month onwards for 11 months
Rent exp Dr. 5000
To prepaid rent 5000
Q6.
Solve Q5 assuming 5 Generators were taken on Annual rent of Rs. 60000 each from Tarang Electricals.
View answer
Annual rent paid = 60000 ×5 = 300000
Since rent is more than 240000
TDS is applicable @ 2% under 194 I on whole 300000
Entry
Rent exp Dr. 25000
Prepaid rent Dr. 275000
To Tarang 294000
To TDS 194 I non co. 6000
One month rent is expense 300000 ×1/12= 25000
Remaining 275000 is prepaid
Entry
Rent exp Dr. 25000
To Prepaid rent 25000
[No TDS again as TDS already deducted]