Section 194-I of the Income-tax Act, 1961 requires that tax be deducted at source at the prescribed rates from payment of any income by way of rent. Now the issue is whether section 194-I is applicable on lump sum lease premium paid by an assessee for acquiring long-term leasehold rights for land or any other property.
on this CBDT had clarified that lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights over land or any other property are not payments in the nature of rent within the meaning of section 194-I of the Act. Therefore, such payments are not liable for TDS under section 194-I of the Act.
Refer attached circular for more details-