TDS on Rent Payment: How to Calculate and Deduct Tax on Rent Paid?

Author: Sanana Goyal

What is TDS?

The TDS concept was introduced to collect tax from the source of income itself. According to this idea, a person (the deductor) who must pay another person (the deductee) a specified payment type must withhold tax at source and remit it to the Central Government. The deductee from whose income tax was withheld at source would be entitled to receive credit for the amount withheld based on Form 26AS or a TDS certificate issued by the withholding agent.

TDS Rate Applicable on Rent

The person who must pay TDS on rent payment must deduct tax at source (i.e., not an individual or HUF). TDS on rent limit for FY 2022-23 is Rs. 2, 40,000.

An organization might pay Rs. 90,000 per month to rent an office, for instance. Since the annual rent exceeds the cap, after a 7.5% tax is deducted, each month, the owner receives a credit of Rs. 83,250. It is necessary to pay the government the remaining sum.

How is TDS on Rent Calculated?

The amount owed must be calculated to determine if a rent payment is subject to TDSon rent paid by the individual. The payee is required to figure out the TDS rate for rent and reduce the amount of the annual amount exceeding Rs. 2,40,000.

Akshar Enterprises, for example, makes monthly payments of Rs. 35,000 for equipment. They are increased to Rs. 4,20,000 per years in rent. The payee must therefore deduct Rs. 525 ($1.5%) or 1.5% TDS on rental income.

The payer is responsible for making TDS on rent deductions. If they don't, they must pay interest starting on the day the tax is deductible and continuing until the tax is deducted at a rate of 1% each month. The payer must pay interest at a rate of 1.5% per month from the day the tax is deducted until the day it is deposited if they reduce the TDS on the rent amount but fail to remit it to the government.

How to make a TDS Payment?

  1. Visit the NSDL website to start the e-filing process.

  2. In the TDS/TCS area, choose "CHALLAN NO./ITNS 281". Your browser will take you to the e-payment page.

  3. Enter the following information on this page.

  • If you deducted TDS while paying a firm, choose "Company Deductees" under "Tax Applicable." Otherwise, choose "non-Company Deductees."
  • Type in the assessment year and TAN for which the Payment is being made.
  • Type the "Pin Code" and choose the "State" option from the drop-down menu.
  • Decide whether to pay for TDS on rent deducted and paid by you or TDS assessed regularly.
  • Select "Nature of Payment" and "Mode of Payment" from the drop-down menu.
  • Push the "Submit" button.

  1. After submission, a confirmation screen will appear. The confirmation screen will show the taxpayer's complete name as it appears in the master document if the TAN is valid.

  2. After the data you entered has been confirmed, you will be taken to your bank's net banking website.

  3. After logging in to the net banking website with the user's name and password provided by the bank, the taxpayer should proceed to complete the Payment.

  4. When an electronic payment is made successfully, a challan counterfoil with the CIN, payment information, and bank name is presented. This counterfoil is evidence of the transaction's Payment. You must file your TDS return after making the TDS payment.