Regarding Rental Income

Hey Rudra,

Let me break down your queries:

1. Why is TDS deducted under Section 194-I (Rent) without any formal agreement?

• Section 194-I covers TDS on rent paid for land, building, machinery, equipment, or furniture. It doesn't mandate a written agreement for deduction of TDS. If the company is paying you for the use of your property (even informally), they are liable to deduct TDS under 194-I as per the Income Tax Act.

• The fact that you share income in a 70:30 ratio doesn’t change the nature of the payment—it's still rent.

• Deduction under 194-C (contract) is applicable only when the payment is for contract work/service and not for property rent.

• So, their action to deduct TDS under 194-I is correct as per the law, regardless of any formal agreement.

2. How to save tax on Rs. 3,20,000 rental income (and GST turnover ~6L)?

• Rental Income Taxation:

  • You can deduct municipal taxes paid on the property.

  • You are entitled to 30% standard deduction on net annual value (income after municipal tax deduction) for repairs/maintenance.

  • Interest on any home loan taken for the property (if applicable) is also deductible.

• Tax Planning Options:

  • Claim deductions under Section 80C (up to Rs 1.5L) on investments like PPF, ELSS, life insurance, etc.

  • Consider investing in Section 80D (health insurance), or other available deductions.

  • If GST turnover (6L) includes this rental income, check whether you are liable to register for GST or not. Typically, rent for immovable property is exempt from GST unless it’s commercial space. Verify the nature of rent.

  • For GST turnover under Rs 20L (or applicable threshold in your state), you may not need GST registration.

• Professional Advice: Since your case involves rental income and business income (contracting), it might be beneficial to consult a CA to help optimize your tax structure and file returns properly.