TDS on individual paying rent more than 50 Thousand

This article explains the new section 194IB notified by Finance Act, 2017 in the Income Tax Act.

Earlier, only individuals and HUFs who were mandatorily required to have their accounts audited as per the tax laws were required to withhold tax on rental payments on immovable property. However, with the introduction of this new section, all individuals and HUFs who are paying rent over and above Rs. 50,000 per month would be mandatorily required to withhold tax from June 1, 2017.

Question 1. What is the effective date of section 194IB?

Answer: This section is applicable w.e.f. June 1, 2017.

Question 2. Who are covered by this section?

Answer: Individuals and HUFs whose accounts are not required to be audited under the income tax laws. For Individuals and HUFs whose accounts are required to get their accounts audited (under section 44AB of IT Act) are covered by separate section 194I and they do not fall in this section.

Question 3. Who is liable to deduct TDS u/s 194IB?

Answer: Individuals and HUFs (Tenant) whose accounts are not required to be audited under section 44AB of IT Act.

Question 4. Meaning of Rent?

Answer:”Rent” as per the provisions of the section 194IB means any payment under any lease, tenancy, sub-lease, or any other agreement or arrangement for the use of any Land or Building or Both:

Question 5. What is the threshold of income?

Answer: Rent paid in excess of Rs. 50,000 per month or part of the month.

Question 6. Rate of tax to be deducted?

Answer: The rate of tax deducted u/s 194IB 5%.

Question 7. Which type of Property covered?

Answer: Both type of Commercial and residential Property is covered under section 194IB.

Question 8. On which amount TDS to be deducted?

Answer: Tax is to be deducted on the amount of rent of whole of the pervious year or of whole of the tenancy period, because tax is to be deducted at the rate of 5% of such income and such income refers to any income by way of rent, exceeding Rs. 50000/- per month or a part of month credited or paid during the pervious year. In simple term it means total annual rent paid to resident landlord.

Question 9. At which point of time tax is to be deducted? 

Answer: Tax needs to be withheld /deducted once in the financial year only. However, where the property is vacated during the year, the tax needs to be deducted on the last day of the tenancy.

Question 10. Is there any requirement of TAN?

Answer: The tenant does not need to apply for TAN. Provision of section 203A does not apply to person covered in this section. The PAN is sufficient to meet the provisions of this section.

Question 11. Is there any requirement of PAN of landlord?

Answer: Yes the tenant is required to obtain the PAN of landlord, In the absence of PAN or failure to provide the same, tax shall be withheld/deducted @20%. However, the overall tax in such a scenario shall be restricted to the rent payable for the last month of the financial year or tenancy whichever is earlier.

Question 12. How to deposit tax?

Answer: The tenant should fill a Form 26QC electronically which is a challan-cum-statement. Either make the payment online or offline make the payment subsequently by visiting any of the authorized bank branches.

Question 13. How will transactions of joint parties (more than one tenant/landlord) be filed in Form 26QC?

Answer: Online challan-cum-statement in Form 26QC is to be filed by each tenant for unique tenant-landlord combination for respective share. For example in case of one tenant and two landlords, two forms have to be filed in and for two tenants and two landlords, four forms have to be filed for respective rent shares.

Question 14. When to deposit tax?

Answer: Within 30 days from the end of the month in which the deduction was made.

Question 15. Is there any requirement for tenant to provide proof of TDS deducted to landlord?

Answer: Tenant needs to issue a TDS certificate (Form 16C) to the landlord as proof of taxes deducted. It is to be issued within 15 days from the due date of furnishing challan cum statement in Form 26QC. Form 16C will carry details such as name and address of the deductor (that is, the tenant) along with PAN, name and address of the deductee (the landlord) along with PAN, details of how much tax was deducted and deposited, the date of payment on which the tax was deposited.

Question 16. Is there any requirement for Penalty/ fees for non-deduction of TDS or delay in its deposit?

Answer: For, non-deduction of tax, the tenant may be required to pay a penalty equal to amount of taxes  withheld.

If the tenant delays in deposit of taxes withheld, he may be liable to pay penal interest at the rate of 1% per month or part of the month where there is delay in deducting the tax or 1.5% per month where tax is deducted but there is delay in depositing the same.

Question 17. What would happen if there is delay in filing of Form 26QC and issuing Form 16C?

Answer:  Delay in filing of Form 26QC may attract a late fee of Rs. 200 per day.  Form 26QC is not filed within one year after the due date, a penalty ranging from Rs 10,000 to Rs 1,00,000 could be levied on the tenant. For delay in issuing Form 16C, the penalty is Rs. 100 per day.

Disclaimer: The contents of this article are solely for information and knowledge and does not constitute any professional advice or recommendation. Author does not accept any liability for any loss or damage of any kind arising out of this information set out in the article and any action taken based thereon.

Read About TDS on Rent

(Republished with Amendments by Team Taxguru)