Mastering TDS on Payment of Rent: A Comprehensive Guide to Section 194IB

Section 194IB of the Income-tax Act introduces crucial provisions regarding Tax Deducted at Source (TDS) on rent payments. Whether you’re an individual or a Hindu Undivided Family (HUF), it’s essential to grasp the nuances of this section to ensure compliance and avoid penalties. Let’s delve into the key aspects of Section 194IB:

1. What is Section 194IB under the Income Tax Act?

Section 194IB of the Income-tax Act provides the provisions in relation to TDS on payment of rent.

2. What does Section 194IB provide?

As per Section 194IB, it is mandatory for any person such as individuals / HUF to deduct TDS on rent paid to a resident, exceeding Rs 50,000 per month even though such persons are not liable to get their books of account audited u/s 44AB.

3. What is the meaning of rent as provided by Section 194IB?

According to the provisions of the said section, rent means a payment made by a payee under a tenancy, lease, sub-lease, or any other arrangement made for assets such as land including a factory building, building including a factory building, Machinery, Furniture, Equipment, Plant, Fittings. The payee may or may not own the assets mentioned above.

4. What is the timing of the deduction of TDS on Rent?

TDS must be deducted, by the individuals or HUFs, earlier than:

At the time of credit of rent (for the last month in the previous year or the last month of the tenancy if the property is vacated before or during the year), or At the time of payment (via cash or cheque or draft or any other mode).

5. What is the TDS rate under section 194IB?

The TDS rate is 5% if the rent payment exceeds Rs 50,000 and the landlord’s PAN is provided. However, if the PAN of the landlord is not available, then a TDS of 20% will be applicable.

6. What is the due date for depositing TDS u/s 194IB?

• Where the payment is made by or on behalf of the government – TDS is to be deposited on the same day.
• Where the payment is made in a case other than the government – on or before seven days from the end of the month in which deduction is made, where tax is paid accompanied by an income-tax challan.

If the amount is credited or paid in March – on or before April 30.

7. What is the frequency and mode of TDS payment?

An individual/HUF’s paying rent must deduct and pay the tax to the government once per financial year. A challan-cum-statement i.e. Form 26QC should be used for making the TDS payment. Furthermore, the tenant is also required to issue Form 16C, a TDS certificate to the landlord as proof that the tax in the form of TDS has been duly deposited with the tax department. A tax deduction account number (TAN) is not necessary to be obtained for depositing TDS with the tax department.

8. What is the applicable penalty in case of non-deduction or delay in deposit of TDS?

In case of non-deduction of taxes, the tenant will be required to pay a penalty which is equivalent to the amount of taxes deducted.
If the tax deposited to the government is delayed, interest of 1% for delay in deducting and 1.5% on account of delay in depositing tax will be levied.
In case of failure on the file Form 26QC within 30 days from the end of the month in which rental payment is made after deducting TDS, a late fee of Rs 200 per day would be levied.

9. Online TDS Payment Procedure under 194IB

• Step 1: Open the URL, https://www.protean-tinpan.com/.
• Step 2: Click on the option ‘TDS on Rent of Property’. Then, click on ‘Online form for furnishing TDS on property (Form 26QC)’.
• Step 3: A detailed page with the headline ‘e-Payment of Taxes’ will appear on the screen. Fill in all the necessary details such as property details, tax deposit details, the amount paid, date of tax deduction, and landlord and tenant details.
• Step 4: Tax can either be paid online immediately or visit an authorised bank for the same.
• Step 5: Note the acknowledgement number of the payment for future reference. Form 26QC can also be downloaded and printed for documentation purposes. Also, provide Form 16C to the landlord as proof of tax payment. The landlord may use it for claiming tax credit at the time of filing his tax return.

Taxcellent helps you with a deposit of TDS deducted from rent paid to residents by individuals/HUF’s & we also assist you in providing Form 16 to be issued after the deposition of TDS and TDS returns filing services in Delhi.