The all new section 194-IB has been inserted in Finance Act, 2017 and made effective from June 1, 2017. Under existing provisions, only individual and HUF who are liable for tax audit, only they are required to deduct tax at source. In order to widen the scope of Tax deduct at source, budget 2017 came up with the new section i.e. 194-IB.

In this write- up, various aspects of 194- IB are being covered.

Under section 194- IB, Individual and HUF who are not liable for tax audit under section 44AB are being covered. Let’s go through its related aspects.

What actually section says:

1. Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to five per cent. of such income as income-tax thereon.

2. The income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

3. The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

4. In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be. 

“Rent”  means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both. 

Crux of the section 194-IB

Eligible Person

Individual or HUF who are not liable for tax under section 44AB.

Trigger Limit

Rent of Rs. 50,000 for a month or part of the month.

Rate of TDS

5%

This section does not applies to those rent which are covered under Section 194-I.

Highlights of Section 194-IB 

No need to obtain TAN

Under this section, Tax payer need not to obtain TAN.

Deduction, once in a year

Under this section, Tax payer is required to deduct tax at source only once in a financial

Time of deduction

The tax should be deducted at the time of credit or payment (whichever is earlier) of rent for the last month of the tax year or last month of tenancy if the property is vacated during the year, as applicable.

Notification on June 8, 2017

CBDT recently notified two new forms 16C & 26QC on June 8, 2017. Main points of notification:

Time period & Form

Any sum deducted under section 194-IB shall be paid to the credit of the Central Government within a period of thirty days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QC.

Authorized Bank

Tax so deducted shall be deposited to the credit of the Central Government by remitting it electronically  into the Reserve Bank of India or the State Bank of India or any authorized bank.

TDS Certificate in Form 16C

Every person responsible for deduction of tax under section 194-IB shall furnish the certificate of deduction of tax at source in Form No.16C to the payee within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QC under rule 31A after generating and downloading the same from the web portal specified by the Principal Director General of Income-tax (Systems)or the Director General of Income-tax (Systems) or the person authorised by him. 

Let’s have a quick comparative view of Section 194-I & 194-IB

Basis 194-I 194-IB
Applicability – 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-I
Trigger Limit Rs. 1,80,000 Per annum Rs. 50,000 per month or part of the month during financial year
TDS Rate 10% 5%
TAN requirement TAX in required No TAN is required, PAN is sufficient
If the rent is being paid to a non-resident, then section 194-IB doesn’t apply. 

Hope this information will help you in your Professional endeavors. For further assistance/query, feel free to write to us. 

Author: C S Ekta Maheshwari is the Author of this article and is Company Secretary by profession. The Author can be reached at csektamaheshwari14@gmail.com

Disclaimer:

The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.

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