Section 194-I

Section 194-I — the law in short

What the courts have decided on section 194-I, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Japan Airlines Co Ltd v CIT Supreme CourtHelps taxpayer
  We pay landing and parking charges to the airport. Is that rent under 194-I at the higher rate?
  No. The charges pay for a bundle of services connected with operating aircraft at the airport — air traffic services, ground safety, aeronautical communication and compliance with safety standards — with use of the tarmac only incidental, so they are not rent under s.194-I and s.194C is the right provision.
• Hindustan Coca Cola Beverage P Ltd v CIT Supreme CourtHelps taxpayer
  I did not deduct TDS, but the person I paid has already paid tax on it. Can the department still recover it from me?
  Reported as holding that the tax cannot be recovered twice — once the payee has paid, the deductor is not liable for the tax again. Interest may still run for the period of delay.
• CIT (TDS)-2 v Santur Builders Pvt Ltd High CourtHelps taxpayerNo later treatment found
  The AO says our EDC paid to HUDA was 'rent' and has raised a s.201 demand for not deducting under s.194-I. Is that right?
  No. External Development Charges paid to the Haryana authority are not rent, so s.194-I is not attracted and a s.201(1)/201(1A) order built on s.194-I cannot stand. The Delhi High Court dismissed the Revenue's appeal, holding the point squarely covered by its own earlier decision in DLF Homes Panchkula. It also refused to let the Revenue rescue the order by switching to s.194C at the appeal stage, because s.194C was never the case the AO made.
• Puri Constructions Pvt Ltd v Addl CIT High CourtHelps departmentNo later treatment found
  I paid External Development Charges to HUDA/HSVP because the Town and Country Planning Department told me to. I have no contract with HUDA. Does s.194C still oblige me to deduct tax at source?
  Yes. The Delhi High Court rejected the developers' challenge and held that EDC payments fall within s.194C. The privity argument does not work: s.194C looks for a contract under which the contractor carries out work, not for a contract between the payer and the payee. Nor does s.196 rescue the developer, because HSVP is a legal entity distinct from the Government of Haryana. This is a different question from the one decided in DLF Homes Panchkula, which held EDC is not 'rent' under s.194-I. The two decisions sit side by side and do not conflict.
• DLF Homes Panchkula Pvt Ltd v JCIT High CourtHelps taxpayer
  Are External Development Charges paid to HUDA 'rent' under s.194-I? And if the AO picked the wrong section, can the department switch sections on appeal?
  EDC paid to the Haryana authority under the statutory licensing scheme is not rent, so s.194-I is not attracted. The Revenue did not even try to defend the Assessing Officer's reasoning; it asked instead for a remand so the officer could apply s.194C. The Court refused. An order under s.201 stands or falls on the reasoning the officer actually gave, and the reasoning here was fundamentally flawed. The s.201(1) and 201(1A) demands were set aside.
• PCIT v Asian Mills P Ltd High CourtHelps taxpayer
  I paid freight without TDS after taking the transporters' PANs. Can the AO still disallow the freight?
  No. The exclusion from the duty to deduct in s.194C(6) is complete the moment its substantive conditions are met, and from that point the payer has no authority to deduct at all; the obligation under s.194C(7) to furnish particulars arises at a much later point and its breach cannot revive a deduction obligation that never existed. Since s.40(a)(ia) operates only where tax was deductible and was not deducted, it had nothing to work on. On the facts the Tribunal had found that no prescribed authority stood nominated to receive the particulars, so filing them with Form 26Q was sufficient compliance. Two other issues went the same way: discounts to customers who took delivery into their own godowns were not rent under s.194-I, and depreciation on cars registered in directors' names but paid for and used by the company was allowed on beneficial ownership.
• DIT (International Taxation) v Schlumberger Asia Services Ltd (Full Bench) High CourtHelps taxpayer
  Our Uttarakhand assessments add back the service tax ONGC reimbursed to us. Is there a binding answer in that High Court?
  Yes, and it is against the Revenue. A Full Bench of the Uttarakhand High Court answered the reference holding that the amount reimbursed by ONGC to the service provider, representing service tax the provider had already paid to the Government, does not form part of the aggregate amount referred to in clauses (a) and (b) of s.44BB(2).
• DIT v Mitchell Drilling International Pvt Ltd High CourtHelps taxpayer
  The officer has added the service tax we collected from ONGC to our s.44BB gross receipts. Is that right?
  No. Service tax collected by the assessee and passed on to the Government is not to be included in the gross receipts under s.44BB(2) read with s.44BB(1). It is not an amount paid or payable, or received or deemed to be received, for the services rendered — the assessee is only a collecting agency.
• CIT v Maharashtra State Electricity Distribution High CourtHelps taxpayer
  We pay transmission and wheeling charges to a licensee. Is TDS due under 194-I or 194J?
  Neither, on this assessee's facts. Carrying power over another's network gives the payer no possession or occupancy of the network, so the charge is not rent under s.194-I; and the charge is a tariff fixed by the regulator, not consideration for a technical service rendered to the payer, so s.194J does not apply either. Note that the Court expressly confined its conclusion on rent to this assessee, in view of the public function it discharges after the restructuring of the State Electricity Board.
• East India Hotels Ltd v CBDT High CourtHelps taxpayer
  We book rooms and banquet facilities for staff and clients and the hotel bills us monthly. Is that a contract for work on which we have to deduct under section 194C?
  No. The Bombay High Court held that the facilities and amenities a hotel makes available to its customers are not "work" within section 194C, and quashed Circular No. 681 of 8 March 1994 to the extent it said that section 194C applied to payments made by customers to the hotel for availing them. The Court read "carrying out any work" as limited to work which, on being carried out, culminates in a product or result — constructing a building or a dam, laying a road or a railway line, erecting or installing plant. Paying a hotel bill is not that.
• Anusuya Alva v DCIT High CourtHelps taxpayer
  My tenant deducted tax from my rent but never paid it over or gave me a Form 16A. The department is now recovering it from me - can it?
  No. The Karnataka High Court quashed the demand to that extent. Section 205 bars a direct demand on the assessee to the extent tax has been deducted from her income, and the section says nothing about the deducted tax having been remitted. The word deduct in section 205 cannot be read as deducted and remitted. The person deducting acts as an agent of the Revenue under a statutory compulsion the payee cannot resist, so his default cannot be visited on her. The Revenue must recover from the deductor, and was restrained from enforcing the demand against the landlord by any coercive method.
• ACIT v SDV International Logistics Ltd ITATHelps taxpayerNo later treatment found
  My employees claim HRA and home loan interest together. Must I treat that as a double benefit?
  No, not on these facts. The point was ground 2 of a composite order under s.201 and s.271C. The first appellate authority had held the exemption and the interest deduction to be two independent provisions, each with its own conditions, and the Tribunal upheld that because the department could not controvert it, so the short deduction and the consequential penalty both fell away. The employees concerned had let out the houses they owned and were living in rented premises, with the whole of the interest set against rental income and the exemption claimed on the rent they actually paid.
• Statutory position — s.194H: two per cent on commission or brokerage paid to a resident since 1 October 2024, on a threshold that became twenty thousand rupees on 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  I pay my selling agents a percentage on every order they bring in, and I give my distributors a discount off the list price. Do I deduct under section 194H, at what rate, and from what figure does the obligation start?
  Section 194H makes a payer who is not an individual or a Hindu undivided family deduct tax on any income by way of commission or brokerage paid to a resident, at two per cent. It was five per cent until 30 September 2024 and was substituted by Act No. 15 of 2024 with effect from 1 October 2024, so anything still applying five per cent to a later payment is applying a superseded rate. The threshold is an annual aggregate, not a monthly one: no deduction is required where the amount, or the aggregate of the amounts, credited or paid or likely to be credited or paid to that payee during the financial year does not exceed twenty thousand rupees, a figure substituted for fifteen thousand rupees by Act No. 7 of 2025 with effect from 1 April 2025 — and it stayed an annual aggregate on the very date section 194-I's rent threshold became a monthly one, so a payer who runs both rent and commission now applies two different kinds of test. Insurance commission is expressly outside the section and belongs to section 194D, and services rendered that are "professional services" are excluded from the definition and belong to section 194J; the section is also not divided into sub-sections, being printed as one unnumbered operative paragraph, three provisos and an Explanation in four clauses. All of this is the Income-tax Act, 1961, which the CBDT's transition FAQ says stands repealed on 1 April 2026. For a credit or payment on or after that date the corresponding provision is serial number 1(ii) of the Table to section 393(1) of the Income-tax Act, 2025, at the same two per cent and the same twenty thousand rupees.
• Statutory position — s.194-I: two per cent on plant, machinery or equipment and ten per cent on land, building, furniture or fittings, on a threshold that became fifty thousand rupees a month on 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  I pay rent for a warehouse and I also hire a generator on a monthly charge. Do I deduct under section 194-I, at what rate on each, and from what figure does the obligation start — is it an annual total or a monthly one?
  Section 194-I sets two rates on one kind of payment: two per cent where the rent is for the use of any machinery or plant or equipment, ten per cent where it is for the use of any land or building (including a factory building), land appurtenant to a building, furniture or fittings, and both have stood since 1 October 2009. The threshold is the part that moved — until 31 March 2025 it was an annual aggregate of two hundred and forty thousand rupees paid to a payee, and from 1 April 2025 the first proviso was substituted so that the test is now whether the rent credited or paid "for a month or part of a month" to that payee exceeds fifty thousand rupees, so a payer who is still adding up the year has the wrong test. The section does not reach an individual or a Hindu undivided family unless the second proviso brings them in on turnover, and the only exclusion written into the section itself is for rent paid to a real estate investment trust on a real estate asset referred to in clause (23FCA) of section 10. All of this is the Income-tax Act, 1961, which the CBDT's own transition FAQ says stands repealed on 1 April 2026. For a credit or payment on or after that date the corresponding provision is serial number 2(ii) of the Table to section 393(1) of the Income-tax Act, 2025, which carries the same two rates and the same fifty-thousand-a-month threshold.
• Statutory position — s.194-IB and s.194M: the once-a-year deduction on rent, the cap that operates only under s.206AA, the gateway that keeps most individuals out of s.194M, and why neither needs a TAN CBDT Circulars & InstructionsCuts both ways
  I am an individual paying Rs 70,000 a month rent, and separately I have paid an interior contractor Rs 62 lakh for my own house. When exactly do I deduct, how much, and do I need a TAN?
  Under section 194-IB you deduct once, not monthly: the tax is deducted at the time of credit of rent for the last month of the previous year, or the last month of the tenancy if you vacate during the year, or at the time of payment of that rent, whichever is earlier, and the rate is two per cent of the income by way of rent, substituted for five per cent with effect from 1 October 2024. Under section 194M you deduct two per cent, again substituted for five per cent from the same date, but only if you are not a person required to deduct under section 194C, 194H or 194J, and only if the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Neither section requires a TAN: section 194-IB(3) and section 194M(2) each disapply section 203A.
• Statutory position — s.194M and s.194-IB: the rate fell from five per cent to two per cent on 1 October 2024 CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My client is an individual paying a contractor and also paying rent. He has no TAN. What does he deduct, and at what rate?
  Two per cent under either section, for anything on or after 1 October 2024; five per cent before that. Section 194M applies to an individual or HUF not already covered by s.194C, s.194H or s.194J who pays a resident more than fifty lakh rupees in a financial year for contract work, commission or brokerage or professional fees. Section 194-IB applies to an individual or HUF outside the second proviso to s.194-I who pays a resident rent exceeding fifty thousand rupees for a month or part of a month. Neither section requires a TAN, because s.203A is disapplied in both.
• Statutory position — s.194C: one per cent for an individual or HUF and two per cent for everyone else, the thirty thousand and one lakh thresholds, and the material-bought-from-a-third-party carve-out that takes a contract outside "work" CBDT Circulars & InstructionsCuts both ways
  I pay a fabricator to make parts to my drawings and I pay lorry owners to move my goods. Do I deduct under section 194C, at what rate, and at what figure does the obligation start — is it thirty thousand rupees or one lakh?
  Both figures are live and they do different jobs. Section 194C(5) says no deduction is to be made where the single sum credited or paid does not exceed thirty thousand rupees, and its proviso says that once the aggregate of such sums in the financial year exceeds one lakh rupees you must deduct under the section anyway. So a single bill of Rs 35,000 is caught on its own, and a run of Rs 12,000 bills is caught the moment the year's total passes Rs 1,00,000. The rate is one per cent where the payee is an individual or a Hindu undivided family and two per cent in every other case. Whether the fabrication is "work" at all depends on whose material is used: manufacturing to your specification out of material bought from you (or from an associate of yours) is "work"; the same job done out of material the fabricator bought from anyone else is expressly excluded, and that exclusion is the line between section 194C and a contract for sale. All of this is the 1961 Act, which the CBDT's own transition FAQ says stands repealed on 1 April 2026: for a credit or payment on or after that date the corresponding provision is section 393(1) of the Income-tax Act, 2025, which carries the same rates and the same two figures.
• Statutory position — s.197: the Assessing Officer may certify a lower rate, or nil, for a listed section, but only on the payee's application and only for a period of the previous year — the 1961 Act position, for deductions up to 31 March 2026 CBDT Circulars & InstructionsCuts both ways
  My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
  Section 197(1) lets the payee apply to the Assessing Officer for a certificate that the payer may deduct at a lower rate, or not at all. It is not open-ended: it works only for the sections named in it, and the Assessing Officer must be satisfied that “the total income of the recipient justifies” the lower rate. The list is sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195 — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 and 194Q by Act No. 15 of 2024 with effect from 1 October 2024. Section 197(2) then binds the payer: once a certificate is given, he deducts at the certified rate, or nothing, until the Assessing Officer cancels it. Section 197(2A) is the rule-making power, and the rules made under it are rule 28 (application in Form No. 13, filed electronically), rule 28AA (how the rate is worked out and how long the certificate lasts) and rule 28AB (a no-deduction certificate for trusts and other section 139(4C) filers). Nothing in the section or the rules confers a power to backdate a certificate, and in substance it operates forward: rule 28AA(4) sends it to the named deductor, who cannot un-deduct months already past. From 1 April 2026 this machinery is gone — the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025 and the successor is section 395 of the 2025 Act, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026, and from the same date section 395(6) lets that application go to a prescribed income-tax authority instead of the Assessing Officer.
• CBDT Circular 1/2008 CBDT Circulars & InstructionsHelps taxpayer
  We pay cooling charges to a cold storage for our stock. Is that rent under s.194-I at 10%?
  No. The main function of a cold storage is preservation of perishable goods by a mechanical process and storage is only incidental; the customer gets no right to use any demarcated space or the machinery and does not become a tenant. Section 194-I does not apply, and the Board has directed that s.194C applies to the cooling charges instead.
• CBDT Circular 5/2002 CBDT Circulars & InstructionsCuts both ways
  We book hotel rooms through the year for staff and guests. Is that rent under s.194-I?
  It depends on the agreement, not on the volume. Where earmarked rooms are let out for a specified rate and a specified period, that is accommodation taken on a regular basis and s.194-I applies. Where the arrangement is a rate contract - specified types of rooms at pre-determined rates, with no obligation on the hotel to provide a room - s.194-I does not apply.
• United Airlines v CIT High CourtHelps departmentOverruled
  My airline pays landing and parking charges at an Indian airport. Do I have to deduct tax at source on them as rent under section 194-I?
  Yes, on this Delhi High Court view. It dismissed the writ petition against the Commissioner's order under section 264 and held that landing and parking charges are rent within Explanation (i) to section 194-I. That Explanation gives rent a wider meaning than in common parlance: any payment, by whatever name called, under any agreement or arrangement for the use of any land. When the wheels of an aircraft touch the airfield, use of the airport's land begins, and parking is use of land too. The definition is a legal fiction and must be applied literally; arguments about the intention behind the provision are out of place in a taxing statute.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.