TDS On Payment of Rent More Than Rs. 50,000 Per Month By Individuals/ HUFs

CA Brijesh Baranwal

Existing Law

There is an existing provision for deduction of TDS (deduction of tax at source) under section 194-I in the Income Tax Act, 1961 for individuals/HUFs, wherever tax audit is applicable.

Introduction Of Section 194-IB

Now, the Government has widened the scope by introducing a new section 194-IB from June 1, 2017.

Main points of this section are as follows;

1. This section requires that every individual and HUF paying rent more than Rs. 50,000/- per month (or part of a month) for the use of any land or building or both, need to deduct TDS at the rate of 5%.

2. However if the PAN of recipient is not available, rate of TDS will be 20% (limited to the rent of last month of the tenancy).

3. TDS amount shall be deducted in 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.

4. The TDS so deducted 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.

5. Further 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 (TDS certificate) to the payee within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QC.

6. “Rent” for the above purposes 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.

Relevant Section and Notification are below given for further understanding.

Section 194-IB. (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.

Explanation.—For the purposes of this section, “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.]

NOTIFICATION FROM THE CBDT 

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION
New Delhi, the 8th June, 2017
INCOME-TAX

G.S.R. 561(E).—In exercise of the powers conferred by section 295 read with section 194-IB of the Incometax Act, 1961, the Central Board of Direct Taxes, hereby, makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (13th Amendment) Rules, 2017.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules), in rule 30, –

(a) after sub-rule (2A), the following sub-rule shall be inserted, namely:-

“ (2B) Notwithstanding anything contained in sub-rule (1) or sub-rule (2), 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.”;

(b) after sub-rule (6A), the following sub-rule shall be inserted, namely:—

“(6B) Where tax deducted is to be deposited accompanied by a challan-cum-statement in Form No.26QC, the amount of tax so deducted shall be deposited to the credit of the Central Government by remitting it electronically within the time specified in sub-rule (2B) into the Reserve Bank of India or the State Bank of India or any authorized bank.”.

3. In the principal rules, in rule 31, after sub-rule (3A), the following sub-rule shall be inserted, namely:—

“(3B) Notwithstanding anything contained in sub-rule (1) or sub-rule (2) or sub-rule (3), 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.”

4. In the principal rules, in rule 31A, after sub-rule (4A), the following sub-rule shall be inserted, namely:—

“(4B) Notwithstanding anything contained in sub-rule (1) or sub-rule (2) or sub-rule (3) or sub-rule (4), every person responsible for deduction of tax under section 194-IB shall furnish to the Principal Director General of Income-tax (Systems) or Director General of Income-tax (System) or the person authorised by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) a challan-cum-statement in Form No.26QC electronically in accordance with the procedures, formats and standards specified under sub-rule (5) within thirty days from the end of the month in which the deduction is made.”

The Author is a Mumbai based, Practicing Chartered Accountant. In case of queries and suggestions, please contact. Mobile: 9312412020, Email:  [email protected]

Disclaimer- This write up is only for awareness purpose and professional opinion may be required in specific cases depending upon the particular facts.

Read About TDS on Rent here

(Republished With Amendments)