Recent amendment to Income Tax Act as proposed in budget-2007 has sought to change the definition of rent. Hitherto, rental would not mean only the rent for letting out the buildings alone.

Under the exiting provisions contained in section 194-I, tax is required to be deducted at source on payment of rent. The term “Rent” has been defined in the Explanation to the said section to, inter alia, mean payment for use of any building (including factory building) together with furniture, fitting and the land appurtenant thereto whether or not such building is owned by the payee.

The Act has amended the exiting definition of “Rent” in the Explanation to section 194-I to provide that the provisions of the said section are applicable whether the items are rented separately or jointly. The Act also expands the list of items by inclusion of machinery, plant and equipment for the purposes of deduction of tax at source under section 194-I.

This amendment takes effect from 13th July 2006. A rate of ten per cent has been proposed, in the Finance Bill, 2007 effective from 1st June 2007, as the rate of TDS in respect of rent for use of any machinery pr plant or equipment.