TDS On Rent Under Section 194IB of Income Tax

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 P.M 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.

The Rate to TDS to be deducted shall be 5%.

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 Tax Deduction Number 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.

Difference Between Section 194I and 194IB

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 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 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.

[DOWNLOAD Notification No. 48/2017/F. No. 370 142/16/2017-TPL]

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