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:

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

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

Rate of TDS – 5%

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

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

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

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