TDS on Rent by Individual/HUF – Section 194IB
Provisions of this section is applicable from 1st June 2017
A new section 194IB has been introduced from 01st June 2017. This section requires certain individuals or HUF to deduct TDS on rent paid for the use of any land or building or both.
Persons required to deduct TDS under Section 194IB
Individual and HUF who are not required to get his books of accounts audited under section 44AB due to the turnover or gross receipts not exceeding Rs 1 crore or Rs 50 Lakh in case of business or profession respectively.
Individual and HUF who are required to get his accounts audited under Points (c), (d) or (e) of section 44AB. These cover individual and HUF who are reporting profit lower than the presumptive basis.
In other words only individuals and HUF who are required to get his accounts audited due to turnover or gross receipts higher than specified limits are not covered under this section, all other individuals and HUFs are covered in this section.
Even salaried person or person who doesn’t have any income are covered under section 194IB.
Other Individuals and HUF which not covered under this section, company, partnership firm, AOP and BOI are required to deducted TDS from rent under section 194I.
Payment of rent to a resident landlord for use of any land or building or both exceeding Rs. 50,000 per month is liable for tax deduction.
Payment made under lease, sub lease, tenancy or any other agreement or arrangements for the use of any land or building or both are also covered under this section.
Refundable security deposit made to landlord at the time of taking property on rent by tenant should not be covered under this section.
Rent payment for plant and machinery, equipments, furniture and fittings etc are covered under section 194I
If payment is made to non-resident then TDS is deductible under section 195.
Time of Deduction
TDS is to be deducted only at one time in a year and not in every month. TDS is to be deducted at earlier from the following:-
Time of credit of rent to the account of payee for the month of March or the last month of tenancy, if property is vacated during the year as the case may be.
Time of payment of rent to payee for the month of March or the last month of tenancy , if property is vacated during the year as the case may be.
TDS is deductible at the rate of 5% of the rent paid or payable.
However if the person receiving rent doesn’t furnish his PAN then TDS is deductible at the rate of 20% subject to maximum limit of amount of rent payable for the month of march or last month of tenancy as the case may be.
No requirement of TAN number
TAN number is not required by such person to deduct and deposit TDS to Government.
Due Date of Payment
Payment is to be made by tenant using Form 26QC which is a challan cum statement within 30 days from the end of month in which deduction is made. For example if deduction is made in month of March then payment is to be made till 30th of April.
If a person vacate one house and move to another and rent of both houses are more than Rs. 50,000 then Form 26QC is to be made twice in a year for each property owner. In other words, Form 26QC is to be filled by each tenant for unique tenant-landlord combination for respective share. For example:-
In case of single tenant and single landlord, only one form is require to be filled.
In case of single tenant and two landlords, two form is required to be filled for respective shares.
In case of two tenant and two landlords, four form is require to be filled for respective shares.
As deduction is required once a year, so payment is also required to be deposited to Government only once a year. However if tenant is require to file more than one form then separate payment should be made for each form.
How to Fill Challan cum Statement in Form 26QC
Rule 31A of Income tax rules states that a challan cum statement in form 26QC is to be filed within 30 days from the end of month in which deduction under this section is made.
Go to https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp and then click on Form 26QC. The form will now get opened. Please take care that this page also expires if remains inactive for some time.
Details required to fill form 26QC
PAN of landlord and tenant’s PAN
Address of both landlord and tenant
Address of let out Property
Period of Tenancy
Total amount of rent payable
Rent paid or payable for the month of March or the last month of tenancy
Interest or late fees payable
Date of tax deduction
TDS Certificate in Form 16C
TDS certificate is to be given by the tenant to landlord in Form 16C which is generated from the TRACES website. Such certificate is to be given to tenant within 15 days from the due date of submitting Form 26QC, so normally such date will be 45 days from the end of month in which deduction is made. If due date of form 26QC is extended than 15 days from such extended date.
Also landlord can verify details of taxes deducted by tenant in his form 26AS.
1) When the agreement falls across two financial year – Mr. X has entered into a 11 month rent agreement with Landlord Mr. Y from 01st August 2017 to 30th June 2018 @ rent of Rs 80,000 per month.
In this case, Mr. A has to file Form 26QC twice i.e. firstly for the period of FY 2017-18 and secondly at the end of tenancy period (on 30th June 2018).ParticularsAt the end of FY 2017-18At the end of tenancyPeriod of Tenancy8 Months3 MonthsTotal Value of Rent PayableRs 6,40,000Rs 2,40,000Rent paid in last monthRs 80,000Rs 80,000TDS amount @ 5%Rs 32,000Rs 12,000Due date of filing form 26QCOn or before 30th April 2018On or before 30th July 2018TDS certificate in Form 16COn or before 15th May 2018On or before 14th August 2018
2) When the agreement falls in single financial year – Mr. X has entered into a 11 month rent agreement with Landlord Mr. Y from 01st April 2017 to 28th February 2018 @ rent of Rs 80,000 per month.
In this case, Mr. A has to file single Form 26QC at the end of tenancy period (on 28th February 2018).ParticularsAt the end of tenancyPeriod of Tenancy11 MonthsTotal Value of Rent PayableRs 8,80,000Rent paid in last monthRs 80,000TDS amount @ 5%Rs 44,000Due date of filing form 26QCOn or before 30th March 2018TDS certificate in Form 16COn or before 14th April 2018
Note : We have done calculation of TDS on the complete rent paid (even before 01st June 2017 when this section comes into effect) during the financial year 2017-18. Still awaiting for more clarity from the Income Tax Department whether in such case TDS is required to be deducted on the rent paid for the period April & May 2017.
3) When the landlord do not have PAN card – Mr. X has entered into a 6 month rent agreement with Landlord Mr. Y from 21st July 2017 to 20th December 2017 @ rent of Rs 80,000 per month.
In this case, Mr. A has to file single Form 26QC at the end of tenancy period (on 20th December 2017).ParticularsAt the end of tenancyPeriod of Tenancy6 MonthsTotal Value of Rent PayableRs 4,80,000Rent paid in last monthRs 80,000TDS amount @ 20% subject to maximum of last month rentRs 80,000Due date of filing form 26QC assuming the last rent is paid on 21st November 2017On or before 30th December 2017TDS certificate in Form 16COn or before 14th January 2018
Interest and Penalties
Interest is chargeable on short payment/late payment of TDS. There can be following scenarios :-
When TDS is not deducted
Interest at the rate of 1% per month or part thereof, for the period from the date on which TDS is deductible to the date on which TDS is actually deducted.
When TDS is deducted but payment is made lately
Interest at the rate of 1.5% per month or part thereof, for the period from the date on which TDS is actually deducted to the date on which such TDS is actually paid.
Check Taxadda guide to Interest on late payment of TDS for more details and calculations.
Late filing fee of Rs 200 per day under section 234E
A penalty of Rs. 200 per day under section 234E is levied for late filing of form 26QC. The total late filing fees should not exceed the total amount of TDS which is require to be deducted.
Penalty ranging Rs 10,000 to Rs 1,00,000 under section 271H
If the TDS statement is not filed within one year from the due date of furnishing of TDS return, then a minimum penalty of Rs 10,000 (which can go upto Rs 1,00,000) can be levied. The penalty under this section will be in addition to the late filing fee of Rs 200 per day under section 234E.
Section 271H also cover cases of filing incorrect TDS/TCS return such as furnishing incorrect details in the statement filed like PAN, Challan and TDS Amount etc . Similarly minimum penalty of Rs 10,000 (which can go upto Rs 1,00,0000) can be levied.
Penalty on late issuing of TDS Certificate
Penalty of Rs 100 per day shall be payable for any delay in issuing TDS certificate. The total late issuing fees should not exceed the total amount of TDS which is require to be deducted.
Difference Between Section 194I and Section 194IB
BasisSection 194ISection 194IBApplicability– Every person paying rent (except individual & HUF) – Individual & HUF if doing business and covered in tax audit (Turnover exceeds Rs. 1 Crore for Business & 25 lakh for Profession) in last year immediately preceding the financial year in which income by way of rent is credited or paid.Every Individual & HUF not covered in 194-IApplicable LimitRs. 1,80,000 Per annumRs. 50,000 per month or part of the month during financial yearTDS Rate10%5%TAN requirementTAN is requiredTAN is not required. PAN is required.Payment and ReturnMonthly Payment and Quarterly ReturnPayment and Return once in a year.