TDS on Rent of Property

A new section 194-IB has been introduced under The Finance Act, 2017 provides that any Tenant of a property making monthly rental payment exceeding Rs. 50, 000 is liable to deduct TDS at the rate of 5% from the rent payable to a resident landlord.

Eligibility to deduct the TDS on Rent of Property under section 194-IB?

The tenant of the property as an individual or a HUF (not liable for a tax audit u/s 44AB) would have to deduct the TDS and deposit the same to Government.

Individuals and HUFs who are not entitled to get their accounts audited and are paying rent of more than Rs 50,000 per month will have to deduct TDS at 5% of the rent paid in a financial year.

When to deduct TDS

TDS is to be deducted in March, the last month of the financial year. In case the property is being vacated before the end of the financial year, then tax is to be deducted in the last month of the tenancy. The last date for March compliance without interest or penalty is 30 April.

The Tenant of the Property must remember the following points:

1. All individuals or HUFs (except those liable to audit u/s 44AB) paying monthly rent to a resident in excess of Rs. 50,000 are liable to deduct TDS under section 194-IB
2. Deduct tax at the rate of 5 % from the rent payment made to the Landlord.
3. Furnish the Permanent Account Number (PAN) of the Landlord.
4. PAN of the Landlord and Tenant should be mandatorily furnished while filling online Form for furnishing rental information.
5. Do not perform any error in quoting the PAN or other details in the online Form.
6. Download and furnish TDS certificate in Form 16C from TRACES and issue the same to the Landlord or Lessor or Payee within 15 days from the due date of furnishing of the challan-cum-statement in Form 26QC.
7. If the Landlord / Lessor/ Payee is a non-resident, liability to deduct TDS arises under section 195 of the Income-tax Act, 1961.

Points to be remembered by the LandLord/ Lessor of the Property:

1. Provide your PAN to the Tenant for furnishing information regarding TDS to the Income Tax Department.
2. Verify taxes deducted by the Tenant in your Form 26AS.
3. Ask Form 16C from the tenant which has been downloaded from TRACES website only.

In Short:

Section 194-IB:

ü Person Eligible
Any Individual or HUF not liable for tax audit under section 44AB.

ü Limit
Rent of Rs. 50,000 for one month or part of the month.

ü Rate of TDS – 5%

ü No need to obtain TAN
Under this section, Tax payer need not obtain TAN.

ü Deduction, once in a year
As per this section, Taxpayer is required to deduct tax at source only once in a financial year.

ü Time of deduction
The tax should be deducted at the time of credit or payment (whichever is earlier) of rent for the last month of the tax year or last month of tenancy if the property is vacated during the year, as applicable

Form 26QC

Form 26QC is the challan-cum-statement in respect of TDS on rent under section 194-IB of the Income-tax Act, 1961. It can be downloaded from TIN- NSDLwebsite.

What is Form 26QC?

You need to deduct TDS on rent paid to the landlord when the monthly rent exceeds Rs.50,000. It is now your responsibility to deposit the same with the tax authorities. This can be done by filling a form, namely Form 26QC.

When do I need to fill Form 26QC?

You need to submit Form 26QC within 30 days of deducting TDS from the rent you have paid to your landlord. Do note, if your rental agreement states quarterly payments to your landlord then you need to fill and submit Form 26QC within 30 days of deducting the TDS once every quarter. The rule is related to when you pay the rent and deduct the TDS and not a calendar. Form 26QC is the step between deducting the TDS and finally providing the TDS certificate (Form 16C) to your landlord.

Procedure to fill Form 26QC

Firstly fill Form 26QC, which is available at www.tin-nsdl.com. You are required to furnish details of your as well as of the landlord’s PAN, email ID and phone number; address of the property, the amount of tax deducted, etc. There are options for filling multiple PAN in case the property is owned by several people or is leased by multiple tenants. Multiple Form 26QC will be filed in case of various landlords.

After furnishing the details in Form 26QC, You can deposit the TDS through the option available i.e. ‘E-tax payment immediately’ via Net banking, debit or credit cards. You can also make the payments at a later date by opting for the ‘e-payment on subsequent date’ option. You can also visit any authorised bank’s branch to deposit the TDS once you have filled the Form 26QC.

TDS certificate in Form 16C is required to be furnished to the landlord within 15 days of the last permissible date of filing Form 26QC.

What if I don’t comply?

1. You are liable to pay 1% interest for every month of delay in deducting the tax. The penalty is higher at 1.5% per month if the tax has been deducted but not deposited.
2. Late filing of Form 26QC attracts a late fee of Rs 200 per day. For delay in issuing Form 16C, the penalty is Rs 100 per day.
3. If 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.