In spite of already existing similar provisions under section 194-I of the Income Tax Act, 1961, with a view to widen the tax base, the new section 194-IB of the Income Tax Act, 1961 was introduced vide the Finance Act, 2017. The provisions of section 194-IB were made effective from 1st June 2017.
Section 194-IB deals with the provisions relating to TDS deduction on Rent paid by individual / HUF, and the same is explained in brief in the current article.
Basic provisions of section 194-IB
As per Section 194-IB of the Income Tax Act, 1961, the tenant is required to deduct TDS, if the following conditions are satisfied –
In other words, the tenant, being an individual or HUF, is not liable to get its accounts audited.
Meaning of the term ‘Rent’
Explanation to section 194-IB of the Income Tax Act, 1961 provides explicitly the meaning of term ‘Rent’. As per the said explanation, Rent means any payment done under any tenancy or lease or sub-lease or any agreement or any arrangement for the use of any land or building or both.
Rate of TDS under section 194IB
The Individual or HUF who is liable to deduct TDS in terms of provisions of section 194-IB of the Income Tax Act, 1961 is required to deduct TDS @ 5%.
It is important to mention here that in the absence of the PAN of the landlord, the tenant is liable to deduct TDS at the maximum marginal rate of 20%. However, clause (4) to section 194-IB specifically states that such deduction should not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy.
Time of TDS deduction under Section 194IB
If the provisions of section 194-IB of the Income Tax Act, 1961 gets attracted, the individual / HUF is required to deduct TDS within earlier of the following dates –
TDS Deposit with the Government –
Section 194-IB (3) specifically states that the provision of section 203A shall not apply to the tenant who is required to deduct TDS. Meaning thereby that the tenant is not required to obtain ‘Tax Deduction and Collection Account Number’ i.e. TAN.
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)].
Following are the steps which the tenant should follow in order to file Form 26QC –
1. Visit site https://www.tin-nsdl.com/.
2. Navigate the path Services > TDS on Rent of Property.
3. Click on ‘Online form for furnishing TDS on Rent of Property (Form 26QC)’.
4. Under e-payment of Taxes, go to ‘TDS on Rent of Property (Form 26QC)’ and click on ‘Proceed’.
5. Step by step, fill up the Form 26QC and submit.
Issuance of TDS certificate –
Rule 31 (3B) of the Income Tax Rules mandates the tenant to issue TDS certificate within a period of 15 days from the due date of furnishing of Challan-Cum-Statement in Form 26QC.
Figuring out both the Section 194-I and Section 194-IB –
The following table would help the reader to understand the difference between both the section 194-I and section 194-IB –
|Particulars||Section 194-I||Section 194-IB|
|Applicability||Applicable to All the person other than individual / HUF who are not required to get their account audited.||Applicable only to the individual / HUF who are not required to get their account audited|
|Rate of TDS||10%||5%|
|Minimum exemption limit||INR 2,40,000 per annum||INR 50,000 per month|
|Period of TDS deduction||Monthly||Only once in a year.|
|The requirement of TAN for Deductor||Yes||No|
|Form of TDS||Form 16A||Form 16C|
Example for better understanding –
Mr. A (Tenant) entered into a tenancy agreement with Mr. B (Landlord) for a period of 11 months, starting from 1st October 2017 to 31st August 2018. The rent fixed is INR 70,000 per month.
|Particulars||Requirement for Financial Year 2017-2018||Requirement for the Financial Year 2018-2019|
|Period of tenancy||6 Months||5 Months|
(70,000 * 6 months)
(70,000 * 5 months)
|TDS deducted on||31st March 2018||31st August 2018|
|The due date for filing of Form 26QC||On or before 30th April 2018||On or before 30th September 2018|
|The due date for issuing of the TDS certificate in Form 16C||On or before 15th May 2018||On or before 15th October 2018|
Frequently Asked Questions (FAQ) –
Q. 1 What is TDS under section 194IB?
Ans: Section 194IB of the Income Tax Act, 1961 requires the individual / HUF, who are not required to gets their account audited, to deduct TDS in case the rent amount exceeds INR 50,000 per month or part thereof.
Q.2 What is exemption limit for TDS on rent?
Ans: Exemption limit for TDS on rent under section 194-IB of the Income Tax Act, 1961 is INR 50,000 per month.
Q.3 What is period of tenancy in Form 26QC?
Ans: Form 26QC needs to be filed within a period of 30 days from the end of the month in which TDS is deducted.
Q.4 What happens if TDS is not deducted on rent?
Ans: If the tenant required to deduct TDS under section 194-IB fails to deduct the same, then, the tenant would be liable to pay late fee @ 1% per month from the date the TDS was required to be deducted till the date the TDS actually deducted.
Q.5 How is TDS calculated on rent with example?
Ans: Suppose Mr. X pays rent of INR 80,000 per month for 12 months to Mr. Y then TDS as per provisions of section 194-IB would be deducted as under –
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|Section 192 – TDS on Salary|
|Section 192A – TDS on Premature withdrawal from EPF|
|Section 193: TDS on Interest on Securities|
|Section 194 – TDS on dividend|
|Section 194A: TDS on interest other than interest on securities|
|Section 194B and Section 194BB – TDS|
|Section 194C – TDS on Contractors|
|Section 194D – TDS on insurance commission|
|Section 194DA – TDS in respect of Life Insurance Policy|
|Section 194E – TDS on payment to Non-resident Sportsmen or Sports Association|
|TDS under Section 194EE and Section 194F|
|Section 194G TDS on Commission on Sale of Lottery Tickets|
|Section 194H – TDS on Commission or Brokerage|
|Section 194I of Income Tax Act, 1961 – TDS on Rent|
|Section 194IA TDS on transfer of immovable property|
|Section 194LA: Payment of Compensation on acquisition of certain immovable property|
|TDS under Section 194LB, 194LBA, 194LBB and 194LBC|
|Section 194LC: TDS on income by way of interest from an Indian Company or a business trust|
|Section 194LD TDS on income by way of interest on certain bonds and Government Securities|
|Section 194J TDS on Fees for Professional or Technical Services|
|Section 194N – TDS on Cash Withdrawals|
|Section 194M: TDS on Payment of certain sum by certain Individual / HUF|
|Section 195 TDS on payment of any other sum to a non-resident|