This article focuses on Tax Deducted at source on payment of Rent on Residential property by an individual and HUF which is covered by Section 194-IB. Article also cover Tax deduction under Section 194I on rent by those in Business. Article further covers the comparison between TDS deduction section 194I and 194IB.

Concept of TDS on payment of rent by certain individuals or Hindu undivided family

  • Finance Act 2017 introduced Section 194IB which mandates deduction of TDS when rent payment exceeding Rs 50000 for month or part of the month is made. Even Salaried person paying rent more than Rs. 50,000 Per Month and claiming HRA are required to deduct and pay TDS of Landlord
  • Applicability: This section is applicable on an individual or a Hindu undivided family who are not required to have tax audit as per Income Tax Act in immediately preceding financial year.
  • The Rate to TDS to be deducted shall be 5%.
  • If PAN of recipient is not available, tax is deductible at the rate of 20%. However, in such case amount of TDS cannot exceed rent payable for the last month of the previous year or last month of tenancy.
  • The above said tax shall be deducted: when rental expense for the last month of the previous year or the last month of tenancy, if the property is vacated during the year is booked in books of accounts, or at the time of payment, whichever is earlier.
  • The tax deductor is not required to apply for TAN in order to deduct TDS U/S 194IB. CBDT has notified form 26QC filling return under this section & this form is PAN based. This form has to be submitted along with challans within 30 days from the end of month in which TDS has been deducted.
  • The certificate of deduction of tax at source is Form No.16C & it has to be submitted to the payee within fifteen days from the due date for furnishing the challan-cum-statement.
  • Interest @ 1% per month will be levied if TDS is not deducted & 1.5% per month will be levied if TDS is deducted but not paid.
  • The penalty of Rs. 100 per day will be levied if return is filed after due date. The total penalty amount shall not exceed amount of TDS.

Section 194 IB SECTION 194 I
This section is applicable on an individual or a Hindu undivided family who are not required to have tax audit as per Income Tax Act. It is applicable for any person (not being an Individual or Hindu Undivided Family) who in the last year liable to Tax Audit
Rate: 5% Rate: 10% for use of any land or building or furniture or fittings

5% for use of any machinery or plant or equipment

Monetary Limit on  transaction:  Rs. 50,000 Per month Monetary Limit on  transaction:  Rs 2,40,000  Per Annum
TDS to be deducted on last month of the previous year or the last month of tenancy TDS to be deducted Monthly
TAN No.: Not Required TAN No.: Required
Tax Certificate to be issued: Form 16C Tax Certificate to be issued: Form 16A

Extract of Some relevant Sections and Rules:

Section 194IB as per Income tax Act, 1961 [Payment of rent by certain individuals or Hindu undivided family]

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.]

Rule 30 (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.

Rule 30 (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.

Rule 30 (6C)

Where tax deducted is to be deposited accompanied by a challan-cum-statement in Form No.26QD, 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 (2C) into the Reserve Bank of India or the State Bank of India or any authorised bank.

Rule 31(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 31 A 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 authorized by him.

Rule 31(3C)

Notwithstanding anything contained in sub-rule (1) or sub-rule (2) or sub-rule (3), every person responsible for deduction of tax under section 194M shall furnish the certificate of deduction of tax at source in Form No.16D to the payee within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QD 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.

Also Read- CBDT notifies Form no. 26QC for payment of TDS on rent u/s 194IB and Form No.16C for TDS Certificate

TDS on Rent

(Republished with Amendments)

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29 Comments

  1. Sandeep says:

    If rent paid by an individual to the landlord is 48000 p.m. for April and May and then increased to 51000 p.m. from June . Tax to be deducted for the period June to March or on total amount from April to March.

  2. Harinder Mankatala says:

    Hi Deepak – Please help me to refer to the provision in the income tax Act where it is return that delay in filing of Form 26QC will attract INR 100 per day late fees.

    Extract mentioned by you in the article is re-produced below –

    The penalty of Rs. 100 per day will be levied if return is filed after due date. The total penalty amount shall not exceed amount of TDS.

  3. Ashok sawale says:

    We have givinig our building on rent bases for running the school education purose. Is there a need for TDS to be deducted from the rent amount.

  4. Sankalp says:

    My client being an individual is paying a rent of Rs 75000/- per month. However for the FY 2017-18, he has paid Rs 9,00,000/-(i.e 75000*12) in the month of April,2017 itself. My contention is he need not comply with the provision of Section 194-IB. Kindly help me on the same.

  5. vishal kamtane says:

    Hi,

    I need some help. We have rented a shop under HUF. Th monthly rent is Rs 33500, which calculates to 4.02 lakh rupees. Is there a need for TDS to be deducted on this amount. As there is no other income on this HUF. Please reply, thanks in advance?

    Regards,
    Vishal.S.Kamtane

  6. Abdul Quadir says:

    My client (an individual not liable to be audited in income tax act, 1961) is paying rent for godown (using for business purpose) Rs. 50,000 per month plus GST Rs. 9,000 (18% of Rs. 50,000 and claiming GST credit in his GST returns) total 59,000. So is he liable to deduct TDS? since rent amount is not in excess of 50,000
    Or should he deduct TDS on entire amount of 59,000?

    1. Apoorva Joshi says:

      In my opinion, it is advisable to deduct TDS @5% since you are standing on the boundary….. It should be deducted on basic amount i.e Rs.50,000

  7. Mahender Lalwani says:

    Queries Regarding Sec 194 IB

    Mr A on Account of his marriage paid Rs 500,000/- for a weeks celebration to a Resort & Spa say in Ramnagar for stay and other facilities overall. Will Mr A require to deduct TDS u/s 194IB being amount Rs more than 50,000/- for a part of month ?

    Thanks and regards
    CA Mahender Lalwani

  8. Mahender Lalwani says:

    Queries Regarding Sec 194 IB

    1) Rent Paid for the FY 2017-18 more than 6 Lac say 70000 per month , TDS to be deducted in the month of March 2018. On what amount should I deduct TDS? Either on July 2017 to March 2018 (Rs. 6,30,000) or April 2017 to March 2018 (Rs. 8,40,000)

    2) Rent Paid Rs. 48000 Per month , Maintenance Expense paid to landlord Rs. 5000 per month . Should i Deduct TDS u/s 194IB?

    Thanks and regards
    CA Mahender Lalwani

    1. Pradeep Jain says:

      Ans.3. The tax has to be deducted @ 5% on Rs.700000/- ie from June 2017 to March 2018 , for 10 months.As the law implemented from 01 June 2017. Total amt to be deducted is Rs. 35000

  9. saurabh says:

    I came to know about this obligation after seeing the advertisements put by Income Tax department in the newspapers. But by that time I had already paid my rent for the month of march. So when I approached my landlord , he told me that I can not deduct and issue the TDS certificate as he has already shown the rent as his income and paid advance tax on that income. Now what does the law says for this situation? Am I liable for my mistake of not deducting on time ? The landlord has shown the income and paid the tax and there is no loss of revenue to the government, what should i do?

  10. rajat says:

    if there are two owner of the property and rent is given to both of them proportionately then in whose name TDS will be deducted under section 194IB…? plzz explain..?

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