Section 194IB – TDS on Rent paid by Individual / HUF

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 1^st 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 –

• The tenant is either an Individual or HUF whose aggregate turnover / total sales / gross receipts from the business or profession doesn’t exceed the monetary limit specified under section 44AB clause (a) or (b).

In other words, the tenant, being an individual or HUF, is not liable to get its accounts audited.

• The tenant is paying to a ‘resident’ any income by way of rent. Payment to non-resident is not covered under section 194-IB.
• The payment of rent exceeds INR 50,000 per month or part of a month during the previous year.

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 –

• At the time of credit of rent for the last month of the previous year or last month of a tenancy (if in case during the year the property gets vacated); or
• At the time of payment in cash or cheque or draft or by any other mode.

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 1^st October 2017 to 31^st 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
Rent	4,20,000 (70,000 * 6 months)	3,50,000 (70,000 * 5 months)
TDS deductible	21,000	17,500
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 –

• Total rent paid in a year – INR 80,000 * 12 months = INR 9,60,000
• TDS deductible – INR 9,60,000 * 5% = INR 48,000
• Rent payable in last month after TDS deduction = INR 80,000 – INR 48,000 = INR 32,000

Also Read-

Particulars

TCS – Tax Collection at Source – A Complete Guide

TDS Rate Chart for Financial Year 2019-2020

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