# Section 194-I — TDS on Rent

## Rates

Type of Asset Rented	TDS Rate
Plant & Machinery	2%
Building, Land, Furniture, Fittings	10%

## Treatment of Various Payments

### 1. Security / Refundable Deposits

Refundable deposits → No TDS (since not in the nature of income for the recipient)
Non-refundable deposits (effectively advance rent / consideration) → TDS applicable

### 2. Arrears of Rent / Advance Rent

TDS u/s 194-I is applicable on:

Arrears of rent
Advance rent

### 3. GST Component of Rent

TDS is NOT deductible on the GST component of rent — it is to be deducted only on the rent amount net of GST (provided GST is shown separately).

### 4. Lump Sum Lease Premium / One-Time Upfront Lease Charges

TDS u/s 194-I is NOT applicable on a lump sum lease premium or one-time upfront lease charges (treated as capital, not periodic rent).

### 5. Passenger Service Fees (PSF)

PSF paid by an Airline Company to Airport Operator — TDS u/s 194-I is NOT applicable (the use of airport facilities does not constitute hiring of building/equipment in the sense of Section 194-I).

### 6. Landing and Parking Charges

Landing and parking charges paid to airport operators:

TDS u/s 194-I is NOT applicable
TDS u/s 194C IS applicable (treated as service for use of facility)

Worked example

### Example 1

Q: ABC Ltd pays monthly rent of ₹3,00,000 for office building (GST ₹54,000 shown separately). Compute TDS u/s 194-I.

Solution: TDS is on rent excluding GST. TDS = 10% × ₹3,00,000 = ₹30,000 per month.

### Example 2

Q: XYZ Pvt Ltd pays a non-refundable security deposit of ₹5,00,000 to landlord that will be adjusted against future rent. Is TDS required?

Solution: Yes, since it is non-refundable and effectively constitutes advance rent. TDS u/s 194-I is applicable on ₹5,00,000 at 10% = ₹50,000.

### Example 3

Q: An airline pays ₹10,00,000 as landing & parking charges to AAI. Which section applies?

Solution: Section 194-I does not apply. TDS is deducted u/s 194C at applicable rate (1%/2%).

⚠️ Common exam mistakes

Deducting TDS on GST component of rent.
Treating refundable security deposits as rent and deducting TDS on them.
Deducting TDS u/s 194-I on PSF, landing or parking charges paid to airports.
Confusing the rate for Plant & Machinery (2%) with rate for building/furniture (10%).
Not deducting TDS on advance rent or arrears of rent under the mistaken belief that they are not 'rent'.

Reference: Section 194-I — Income-tax Act, 1961

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