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TMI BlogDeduction of tax at source from payment of rent under section 194I of the Income-tax Act, 1961--Clarification regardingX X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961, which provides for deduction of tax at source from payment of income by way of rent. This section as amended by the Finance Act, 1995, reads as follows : " 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to any person any income by way of rent, shall, at the time of credit of such income to the account of the payee or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other agreement or arrangement for the use of any land or any building (including factory building), together with furniture, fittings, and the land appurtenant thereto, whether or not such building is owned by the payee ; (ii) where any income is credited to any account, whether called 'suspense account' or by any other name, in the books of account of the person liable to pay such income, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In cases where the tenant makes a non-refundable deposit tax would have to be deducted at source as such deposit represents the consideration for the use of the land or the building, etc., and, therefore, par-takes of the nature of rent as defined in section 194-I. If, however, the deposit is refundable, no tax would be deductible at source. It is further clarified that if the deposit carries int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -I, to mean any payment under any lease, tenancy, agreement, etc., for the use of any land or building. Thus, if the municipal taxes, ground rent, etc., are borne by the tenant, no tax will be deducted on such sum. Query No. 5: Whether section 194-I is applicable to rent paid for the use of only a part or a portion of any land or building ? Answer: Yes, the definition of the term "any lan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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