The tax rate is 5% if the rent payment exceeds Rs 50,000 and the OWNER`s PAN is provided. Otherwise, if the PAN is not available, a TDS of 20% applies. A joint development agreement is the registered contract between an asset owner and a real estate developer for the construction of new projects. The builder performs construction and legal work as part of a joint development agreement, and the landowner provides land. In such an agreement, the owner of the asset allows the other person to build a real estate project on that asset in exchange for cash payments and/or interest in that project. According to Article 194IC of the Income Tax Act, if the rent payment exceeds Rs.50000 and the OWNER`s PAN number is indicated, TDS by 10% (7.5% w.e.f 14.05.20 as of 31.03.2021). If the OWNER`s PAN number is not available, a 20% TDS applies. Tenants are required to deduct tax once a year and pay it to the government. This payment must be made using a Challan-Cum statement, Form 26QC. In addition, the tenant must issue a TDS certificate to the landlord using Form 16C to verify the tax filed. No tax deduction account number (TAN) is required for the transaction. Note: Pursuant to Circular 715/1995, the Department clarified that payments made by persons other than individuals and HUFs for hotel accommodation regularly used are of the nature of the lease and are subject to the SST under section 194-I.
However, in Circular 5/2002, the Ministry clarified that while the agreement applies only to collective agreements (collective agreements are usually concluded between companies, tour operators, travel agencies, etc.). with hotels to set only hotel room rates for their executives/guests/guests), this is not interpreted as regularly used rooms and therefore TDS is not applicable in such a situation. Therefore, TDS only applies to the payment of room rent to hotels where rooms are used regularly, however, if the agreement applies only to the collective agreement, TDS does not apply. Tenants must deduct the tax once per fiscal year and pay it to the government. A challan-cum statement, Form 26QC, must be used for this payment. In addition, the tenant must present the landlord with Form 16C, a TDS certificate as proof of the tax filed. A Tax Deduction Account Number (TAN) is not required for the transaction. The joint development agreement is an agreement between two people, that is, the owner of the land or building and another person who receives permission to build a real estate project, and in return, he must give the owner a share or payment in cash. Step 5: Note the payment confirmation number for future references. Also note that, according to Article 194IC, the exemption threshold or limit does not exist. However, if such a payment is made by an employee or individual (representing the company) and is reimbursed at a later date, TDS is not taxable. However, if this person is subject to the u/s 44AB audit, TDS will be charged.
Any person, with the exception of the person/HUF who pays an income called rent to another person, must shorten the TDS u/s 194I. On the other hand, if the person/HUF is tested in accordance with paragraphs 44AB(a) and (b), he must also shorten the TDS under u/s 194I.194-IC. Notwithstanding any provision of section 194-IA, any person who, under the agreement referred to in section 45, subsection (5A), is required to pay an amount in return to a resident who is not a benefit in kind at the time the amount is credited to the recipient`s account or at the time of payment in cash or by issuing a cheque or bill of exchange or otherwise, Depending on the previous period, an amount of ten per cent of the income tax attributable to him must be deducted. According to the article, rent refers to a payment made by a beneficiary under a rental, leasing, subletting or other agreement for assets such as: Years: The tax must be deducted from the rent paid under any name for the rental of a property. The deduction of withholding tax does not depend on the nomenclature, but on the content of the agreement. In this case, although the agreement was designed as a business center agreement, the content of the payments is of the rent type. Therefore, the TDS must be deducted in accordance with Article 194-I. Article 194-CI was recently inserted into the 2017 budget and the aim was to bring “joint development agreements" into the scope of application. Let`s understand this section in detail: This section was introduced to bring rent into the scope of TDS regulations, as rent is an important source of income in India that has escaped the tax network.
Who should deduct TDS u/s 194I? The only things that blow us away when we listen to the word “rent" are the payments that have to be made at the beginning or end of each month. This can be understood by the person who lives in the rented house or who needs to give rent such as machine rental, office rent, etc. This little word “rent" puts a lot of pressure on people. Under the Income Tax Act, section 194I, 194IB applies to the Rent SDS, which we will see in detail in this section. Any person who pays rent to a landowner (owner of land or building, or both) under the joint development agreement must deduct the SDS in accordance with section 194IC of the Income Tax Act. The main objective of the introduction of Article 194IC in the 2017 budget was to include “joint development agreements" in the scope. Recommended: Simple Guide to TDS Provisions under the Income Tax Act 1961 Learn the complete guide to the TDS Provisions of the Income Tax Act 1961 here. In addition, we include several topics such as TDS returns, TDS due dates, TDS Income Tax Section 194I penalty for TDS on rent. It imposes on persons (with the exception of individuals/HUFs) who pay rents to resident Indians beyond a certain limit, i.e. the obligation to deduct TDS. .