TDS on Rent paid by Individuals and HUF to Residents & Non-Residents

In the case of rent paid to residents, Section 194IB has been inserted with effect from 1st June, 2017, which is related to TDS on Rent paid by Individuals and HUF to Residents. Article discusses Provisions related to TDS  under Section 194IB on Rent paid by Individuals and HUF to Residents.

1. Who is liable to Deduct Tax under Section 194IB ?

Individuals or HUF who are not required to get their books audited u/s 44AB. (Other than the persons for whom tax audit is applicable for the persons under section 44AD, 44ADA, 44AE, since they are spherically covered u/s 194I).

2. When the liability arises to deduct tax under Section 194IB?

Rent paid per month or part of the month, to a Resident > Rs.50,000/-

Note: Rent Paid to Non-Resident:- Covered u/s 195

3. How much tax to be deducted under Section 194IB:

1. If the Landlord furnishes PAN : TDS @ 5%.

2. If the Landlord does not furnish PAN : TDS 20%

4. Time of TDS deduction under Section 194IB:

1. Tax has to be deducted and remitted once in a year at the time of payment or credit of the Rent for the last moth of the Financial year (or) last month of the tenancy

2. If the Assessee changes the place of residence during the year, then he has to deduct Tax from the rent paid to both the Landlords , if for both the places the rent paid per month exceeds Rs. 50,000/-.

5. Whether the Individual or HUF who is paying Rent should have Tax Deduction Account Number (TAN) for deducting and remitting the taxes?

No

6. Due Date of payment of TDS under Section 194IB:

TDS has to be paid within 30 days from the last day of the month for which TDS is deducted. For example: If tax is deducted in the month of March, then it has to be paid before 30th April., using Form 26QC.

https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

7. Due date for filling up of Form 26QC:

A challan cum statement in form 26QC is to be filed within 30 days from the end of month in which deduction under this section is made.

8. Details required filling form 26QC:

1. PAN of the landlord and the tenant

2. Address of both landlord and tenant

3. Address of let out property

4. Period of tenancy

5. Amount of rent payable

6. Rent payable in last month

7. Total amount paid credited

8. Interest or late fees payable

9. Date of tax deduction

10. TDS Certificate in Form 16C to be issued to the landlord:

11. TDS certificate is to be given by the tenant to the landlord in Form 16C. It can be generated from the TRACES website. https://www.tdscpc.gov.in/app/login.xhtml

12. Form 16C to be given within 15 days from the due date of submitting Form 26QC, i.e. 45 days from the end of the month in which deduction is made.

13. If the due date of Form 26QC is extended, then it is to be submitted within 15 days from such extended date.

Note: To generate the TDS certificate the deductor should get registered with the TRACES.

9. Does any Interest or penalty arises for late payment or deduction of TDS:

Interest @ 1% is levied if TDS is not deducted and interest @ 1.5% per month is payable if TDS is deducted but not paid to government. A penalty of Rs. 100 per day is levied for late filing of Form 26QC.

10. What if the Landlord is non-resident:

1. TDS / WHT u/s 195 will apply instead of section 194IB, irrespective of the rent amount. i.e TDS  / WHT will apply ,  even if the rent paid to the non-resident landlord is less than Rs. 50,000/- p.m.

2. Since the payment is being made to non-residents, TDS to be made @ 31.20% on the entire amount.

3. If the landlord wishes for a lower deduction of tax , same can be done under the following methods:

• Tenant can make an application to the Income Tax Officer, International Taxation, u/s 195(2) of the Income Tax Act (or)
• The landlord can make an application either by themselves or through their authorised representatives in India application to the Income Tax Officer, International Taxation, Chennai u/s 195(3) of the Income Tax Act

4. Since, the tenant will not be in a position to know the landlord’s entire income earned in India, it is advisable to make an application by the landlords, mentioning their entire income in India and ask for a lower rate of deduction.