TDS on Rent under section 194I, 194IB & 194IC

All about TDS on Rent

Meaning of Rent

‘Rent’ means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,—

1. land; or

2. building (including factory building); or

3. land appurtenant to a building (including factory building); or

4. machinery; or

5. plant; or

6. equipment; or

7. furniture; or

8. fittings,

whether or not any or all of the above are owned by the payee.

Section 194I: TDS on Rent 

Liable to Deduct TDS under Section 194-I

Any person, other than an individual or a HUF, is responsible for paying to resident in India, any income by way of the rent, amounting in aggregate to more than Rs.2,40,000/- in a financial year.

However, individuals and HUF who were covered under section 44AB(a) and (b) in the preceding previous year, are also required to deduct tax at source.

Time Limit for TDS deduction u/s 194I

The person responsible for paying rent should deduct tax at source. Tax is to be deducted at source either:

1. at the time of credit of such income to the account of payee; or

2. at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode,

whichever is earlier.

Section 194IB : TDS on Rent by Certain Individuals or HUF

Liable to Deduct TDS under Section 194-IB

As per Finance Act, 2017, “TDS on Rent” under section 194-IB is liable to be deducted by Individuals or HUFs (Hindu Undivided Family) (other than those who Covered in Sec 194 I) responsible for paying to a resident monthly rent exceeding ₹ 50,000. Section 194-IB of the Income Tax Act, 1961 states that for all the transactions with effect from June 1, 2017, tax @3.75% should be deducted by the Tenant/ Lessee/ Payer of the property at the time of making payment of rent

Online TDS Payment Procedure under 194IB

Step 1: Open the URL, https://www.tin-nsdl.com/.

Step 2: Choose the option ‘TDS on Rent of Property’. A new window appears. Click on ‘Online form for furnishing TDS on property (Form 26QC)’.

Step 3: A page with the headline ‘e-Payment of Taxes’ will appear. Fill in the necessary details such as property details, tax deposit details, the amount paid, date of tax deduction, and landlord and tenant details.

Step 4: You can either pay the tax online immediately or visit an authorised bank for the same.

Step 5: Note the acknowledgement number of the payment for future references.

Points to be remembered by the Tenant of the Property:

1. Collect the Permanent Account Number (PAN) of the Landlord and verify the same with the Original PAN card.

2. PAN of the Landlord as well as Tenant should be mandatorily furnished in the online Form for furnishing information regarding the rent.

3. Download and provide TDS certificate in Form 16C from TRACES and issue to the Payee within 15 days from the due date of submitting of the challan-cum-statement in Form 26QC.

Section 194IC: TDS on Payment Made under Specify Payment

Any person who pays to a resident some consideration (not in kind) under a Joint Development Agreement, has to deduct TDS u/s 194IC.

Joint Development Agreement

This is an agreement between the owner of an asset (being land or building or both) who agrees to allows another person to build a real estate project on such asset, in return for share and/or payment in cash.

Common Points

Tax (TDS) Deduction Rates

Tax (TDS) has to be deducted at the time of crediting/paying the income by way of rent to the payee account through a cheque/draft/cash or other payment methods. The rates of TDS can be summed up as follows:

• Rent for plant/ equipment/ machinery- 1.5% TDS on the rent amount paid
• Rent for land/building/furniture/fittings- 7.5% TDS on the rent amount paid
• Individual/HUF not liable to tax audit – 3.75% TDS on the rent paid in cases where more than Rs.50,000 is paid per month as rent.

Time limit on depositing TDS

• Where the payment is made by or on behalf of the Government- On the same day (without using any challan form)
• Where the payment is made in any other case than the Government- On or before 7 days from end of month in which deduction is made, where tax is paid accompanied by an Income tax challan

1. If the amount is credited or paid in the month of March- On or before April 30

2. In any other case- On or before 7 days from the end of the month in which the deduction is made.

• In Case of Section 194 IB- The tenant is required to deposit TDS by filing Challan-cum-Statement in Form 26QC. The tenant is liable to make a deposit of the deducted TDS within a period of 30 days from the end of the month in which TDS is deducted [Rule 30 (2B)]

Form 26QC

 Form 26 QC is the challan cum statement for reporting the transactions liable to TDS on rent under section 194-IB of the Income-tax Act.

Filing form 26QC

As per rule, Taxpayer has to furnish Form 26QC in following scenarios:

• The taxpayer has to mandatorily submit the Form at the end of each Financial Year in case the agreement period contains more than one Financial Year and rent has been paid during the year

In case the agreement period falls in the same financial year, the taxpayer has to mandatorily submit the form in the month when the premise is vacated or when the termination of the agreement.

Consequences of non-deduction/non-payment of TDS

A taxpayer who is liable to deduct TDS will be liable to pay interest @ 1% per month from the date when tax is deductible till the date when tax is deducted.

A taxpayer who has deducted tax but not deposited the same to the government is liable to pay interest @ 1.5% per month from the date when tax is deducted to the date of deposit of the TDS.

Circumstances TDS u/s 194I is not deductible

• Amount payable/paid not exceeding Rs.2,40,000 during the financial year: No tax is required to be deducted in case the amount of rent due or paid does not exceed Rs.2,40,000 from FY 2019-20 onwards.
• Where tenant is individual or Hindu Undivided Family: Deduction is not required under Sec. 194I when the rent is due or paid by an Individual or HUF not carrying on a business which is audited under income tax law.
• Sharing or proceeds of film exhibition between a film distributor and a film exhibitor owning a cinema theatre:
  In case of a film exhibitor and film distributor contract, the share of the exhibitor is on account of composite services. The distributor does not take cinema building on lease or sub-lease or tenancy or under an agreement of similar nature. The payment made is not rental in nature.

Where the payee is the Government :

A person making payment to Government is not required to deduct tax at source under Section 194-I. The payments made to statutory authorities and local authorities are exempt from tax and hence not tax deductible.