{"id":279,"date":"2026-06-23T07:53:01","date_gmt":"2026-06-23T07:53:01","guid":{"rendered":"https:\/\/core9.co.in\/?post_type=blog_post&p=279"},"modified":"2026-06-23T07:53:01","modified_gmt":"2026-06-23T07:53:01","slug":"tds-on-rent-goods-impact-on-landlords-businesses","status":"publish","type":"blog_post","link":"https:\/\/core9.co.in\/index.php\/blog-post\/tds-on-rent-goods-impact-on-landlords-businesses\/","title":{"rendered":"TDS on Rent & Goods \u2013 Impact on Landlords & Businesses"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

Tax Deducted at Source (TDS) continues to be one of the most misunderstood areas of compliance, especially when it comes to rent payments<\/strong> and transactions in goods<\/strong>. With the transition to the Income Tax Act, 2025<\/strong>, many businesses and landlords are struggling to classify payments correctly and avoid penalties.<\/p>\n\n\n\n

\ud83d\udccc TDS on Rent \u2013 Section 194I & 194IB<\/h2>\n\n\n\n
    \n
  • Section 194I<\/strong>:\n
      \n
    • Applies to rent for land, building, furniture, fittings, machinery, or equipment.<\/strong><\/li>\n\n\n\n
    • Rates:<\/strong>\n
        \n
      • 2% \u2192 Machinery\/plant\/equipment.<\/li>\n\n\n\n
      • 10% \u2192 Land\/building\/furniture\/fittings.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
      • Threshold:<\/strong> No TDS if rent \u2264 \u20b950,000\/month.<\/li>\n\n\n\n
      • Applicability:<\/strong> Companies, firms, and HUFs (if turnover > \u20b91 crore business \/ \u20b950 lakh profession).<\/li>\n<\/ul>\n<\/li>\n\n\n\n
      • Section 194IB<\/strong>:\n
          \n
        • Applies when individuals\/HUFs (not liable under 194I)<\/strong> pay rent > \u20b950,000\/month.<\/li>\n\n\n\n
        • Rate:<\/strong> 5%.<\/li>\n\n\n\n
        • Deduction only once per year (last month of tenancy).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

          \ud83d\udc49 Common Confusion:<\/strong> Businesses often misclassify rent for machinery under 194I(b) instead of 194I(a), leading to wrong deduction rates.<\/p>\n\n\n\n

          \ud83d\udccc TDS\/TCS on Goods \u2013 Section 194Q & 206C(1H)<\/h2>\n\n\n\n
            \n
          • Section 194Q (TDS on purchase of goods):<\/strong>\n
              \n
            • Buyer with turnover > \u20b910 crore must deduct 0.1% TDS<\/strong> if purchases from a seller exceed \u20b950 lakh in a year.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
            • Section 206C(1H) (TCS on sale of goods):<\/strong>\n
                \n
              • Seller with turnover > \u20b910 crore must collect 0.1% TCS<\/strong> if sales to a buyer exceed \u20b950 lakh in a year.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

                \ud83d\udc49 Frequent Confusion:<\/strong><\/p>\n\n\n\n

                  \n
                • Who deducts first \u2013 buyer or seller?<\/li>\n\n\n\n
                • Rule: TDS under 194Q overrides TCS under 206C(1H)<\/strong>. If buyer deducts TDS, seller need not collect TCS.<\/li>\n<\/ul>\n\n\n\n

                  \u26a0\ufe0f Impact on Landlords & Businesses<\/h2>\n\n\n\n
                    \n
                  • Landlords:<\/strong> Must track thresholds and ensure PAN availability to avoid higher deduction (20%).<\/li>\n\n\n\n
                  • Businesses:<\/strong> Need robust accounting systems to classify rent correctly and monitor purchase\/sale thresholds.<\/li>\n\n\n\n
                  • Cash Flow:<\/strong> Wrong deductions can block funds until refunds are processed.<\/li>\n\n\n\n
                  • Compliance Risk:<\/strong> Mismatched reporting in Form 26AS can trigger notices.<\/li>\n<\/ul>\n\n\n\n

                    \ud83d\udea8 Penalties & Consequences of Non-Compliance<\/h2>\n\n\n\n

                    Failure to deduct or deposit TDS on rent or goods can lead to serious financial and legal consequences<\/strong>:<\/p>\n\n\n\n

                      \n
                    • Disallowance of Expense (Section 40(a)(ia)):<\/strong>\n
                        \n
                      • If TDS is not deducted, 30% of the expense (rent or purchase) may be disallowed while computing taxable income.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                      • Interest (Section 201(1A)):<\/strong>\n
                          \n
                        • 1% per month \u2192 for delay in deduction.<\/li>\n\n\n\n
                        • 1.5% per month \u2192 for delay in deposit after deduction.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                        • Penalty (Section 271C):<\/strong>\n
                            \n
                          • Equal to the amount of TDS not deducted\/paid.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                          • Prosecution (Section 276B):<\/strong>\n
                              \n
                            • Rigorous imprisonment from 3 months to 7 years<\/strong>, plus fine, for willful default.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

                              \ud83d\udc49 Bottom Line:<\/strong> Non-compliance not only increases tax liability but also risks legal action and reputational damage.<\/p>\n\n\n\n

                              \u2705 Action Points<\/h2>\n\n\n\n
                                \n
                              1. Classify rent correctly<\/strong> \u2013 machinery vs building.<\/li>\n\n\n\n
                              2. Update accounting software<\/strong> with new section codes (194I(a), 194I(b), 194IB, 194Q, 206C(1H)).<\/li>\n\n\n\n
                              3. Monitor thresholds<\/strong> monthly to avoid missed deductions.<\/li>\n\n\n\n
                              4. Communicate with counterparties<\/strong> (landlords, vendors, buyers) to align on TDS\/TCS responsibilities.<\/li>\n\n\n\n
                              5. File returns accurately<\/strong> \u2013 ensure deductions reflect in Form 26AS.<\/li>\n<\/ol>\n\n\n\n

                                <\/p>\n","protected":false},"excerpt":{"rendered":"

                                Tax Deducted at Source (TDS) continues to be one of the most misunderstood areas of compliance, especially when it comes to rent payments and transactions in goods. 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