TDS or Tax Deducted at Source is a mechanism used by the Income Tax Department to collect income tax in India. In accordance with the requirements of this law, the person accountable for making payments such as salary, fees, interest, TDS on rent, etc. is expected to deduct a certain percentage of tax before making such payments to the receiver.
As per Section 194-I of the Income Tax Act, any person (other than an individual and HUF) who needs to pay to a resident of India any income which is in the nature of rent, is liable to collect TDS once the total amount of such income paid/credited or expected to be so, during a particular financial year is more than Rs. 1.8 Lakhs.
HUFs and individuals, who are liable for tax audit as per Section 44AB, during the financial year just before the year in which such rent was paid or credited, also have the responsibility to deduct tax while making such payments.
(The current limit of Rs. 1.8 Lakhs has been in effect since 1st July 2010. Prior to that, the limit was Rs. 1.2 Lakhs.)