Analysis of Section 194-IB with Form 26QC and Form 16C

This article focuses on Tax Deducted at source on payment of Rent on Residential property by an individual and HUF which is covered by Section 194-IB. Article also cover Tax deduction under Section 194I on rent by those in Business. Article further covers the comparison between TDS deduction section 194I and 194IB.

1. Extract of Section 194-IB – Payment of rent by certain individuals or Hindu Undivided Family:

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.

2. Summary of section 194-IB of Income Tax Act, 1961

1. Deduction of TDS u/s 194-IB when rent payment exceeding Rs 50000 for month or part of the month is made.

2. This section is applicable on an individual or a Hindu undivided family who are not required to have tax audit as per Income Tax Act in immediately preceding financial year.

3. The Rate to TDS to be deducted shall be 5%.

4. If PAN of recipient is not available, tax is deductible at the rate of 20%. However, in such case amount of TDS cannot exceed rent payable for the last month of the previous year or last month of tenancy.

5. The above said tax shall be deducted: when rental expense for the last month of the previous year or the last month of tenancy, if the property is vacated during the year is booked in books of accounts, or at the time of payment, whichever is earlier.

6. The tax deductor is not required to apply for TAN in order to deduct TDS U/S 194IB.

7. The certificate of deduction of tax at source is Form No.16C & it has to be submitted to the payee within fifteen days from the due date for furnishing the challan-cum-statement i.e Form 26QC.

C. Comparative view of Section 194-I & Section 194-IB

Basis	194-I	194-IB
Applicability	It is applicable for any person (not being an Individual or Hindu Undivided Family) who in the last year liable to Tax Audit	This section is applicable on an individual or a Hindu undivided family who are not required to have tax audit as per Income Tax Act.
Trigger Limit	Rs. 2,40,000 Per annum	Rs. 50,000 per month or part of the month during financial year
TDS Rate	10%	5%
TAN requirement	TAN in required	No TAN is required, PAN is sufficient

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If the rent is being paid to a non-resident, then section 194-IB doesn’t apply. In such cases Section 195 will be applicable.

D. Brief steps for online filing of Form 26QC (Return Cum Challan in case of Section 194-IB):

• Step 1 : Login to TRACES website with your “User ID”, “Password” and the “Verification Code”. Landing page will be displayed on Screen.
• Step 2 : Select option “ Request for Correction” available under “Statements/ Forms” tab to initiate correction request. Select the Form Type 26QC for correction, on next screen 26QC Correction checklist will appear. After clicking on “Proceed” Pop-Up window will display (If DSC is not registered).
• Step 3 : Select “Financial Year” and “Acknowledgement Number” according to filed Form 26QC, then Click on “Request for Correction” button to initiate request for correction. Request number will be generated for correction statement. User can check the requested Status in “Track Correction Request” option available under “Statements/ Forms” tab.
• Step 4 : Go to “ Track Correction Request” option under “Statements/ Forms” tab and initiate correction once the status is “ Available”. Click on “Available” status to continue.
• Step 5 : Mention CIN details of any one challan paid against 26QC then click on “Proceed” .
• Step 6 : After clicking on proceed button details mentioned in 26QC will display on next screen. Select tab accordingly in which user want to do edit details. Click on “Edit” button. Pop up will be shown on the screen. Click on “Save” to save updated details then click on “Submit Correction”.
• Step 7 : Screen will display to “Confirm the Details” after Submission of Correction Statement (Updated details will be highlighted in Yellow Colour).
• Step 8 : Profile details will be populated as updated on TRACES profile. Click on “Submit Request” to submit correction request.
• Step 9 : After submission of Correction Request if DSC is not registered user gets the option to validate correction through E-Verified (Internet Banking) or AO Approval OR if DSC is registered user gets the option to validate correction through E-Verified (Internet Banking), AO Approval or DSC.

E. Brief Steps to Download Form 16C

Step 1 : Login to TRACES website with “User ID”, “Password” and the “Verification code”. Landing Page will be displayed on the screen.

Step 2 : Click on “Form 16B/16C (For Buyer/ Tenant)” available under “Downloads” tab. taxguru.in

Step 3 : Select “Form Type” “Assessment Year” from drop down list enter “Acknowledgement Number” and “PAN of the Landlord”.

Step 4: After clicking on “Proceed” list of challan(s) will be available to download “Form 16C”.

Step 5 : “Details to be printed on Form 16C” will reflect as per profile information on “TRACES”. Following details will appear-

– Full Name of Person Responsible for Deduction of Tax

– Father’s Name of Person Responsible for Deduction of Tax

– Designation of Person Responsible for Deduction of Tax

and click “Submit Request” to submit request for “Form 16C”.

Step 6: “Request Number” will be generated after submission of request.

Step 7 : In order to track the status of the request click on “Requested Downloads” available under “Downloads” tab.

• Status of the request can be tracked by the search Options “Request Number”, “Date” or “View All”.
• “Form 16C” can be downloaded only if the “Submitted” status changes to “Available”.

Step 8 : Click on “Available” status row then click on “HTTP Download” tab to download Form 16C Zip file.Enter the password to open Zip file of “Form 16C”.

Hope this information will help you in your Professional endeavours. 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.

(Republished with Amendments)