Section 194IB: TDS on Rent of Property

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By Hiral Vakil on March 31, 2020

What is TDS on Rent?

As per section 194IB of the income tax act, tenant of the property being an individual/ HUF (not liable to tax audit under the income tax act) is required to deduct and deposit TDS on monthly rent if rent paid exceeds Rs. 50,000 and the landlord is a resident of India.

What is the rate of TDS on rent of property?

TDS is required to be deducted at the rate of 5% from the rent payable to the resident’s landlord. If the PAN of the landlord is not available then TDS should be deducted at the rate of 20%. The tenant is not required to obtain TAN for TDS deduction on rental payments.  

Who needs to deduct TDS on rent?

TDS on rent is required to be deducted by the tenant of the property before making payment of rent every month. Let’s take an example to understand better: Mr. Ashok is a tenant who pays rent of Rs. 65,000 per month to Mr. Sanjay who is a landlord of the property, then, in that case, Mr. Ashok is responsible to deduct TDS on rent payment made by him.

When to deduct and deposit TDS on rent of property?

  • Tax is required to be deducted from the total annual rent paid to the landlord. It is to be deducted once in the financial year at the end of the year or in the month in which the property is vacated/ rental agreement is terminated.
  • Tax deducted needs to be deposited within 30 days from the last date of the financial year or from the date of termination of the agreement in Form 26QC.

Let’s take an example:     

Mr. Sudhir entered into a tenancy agreement with Mr. John for FY 2017-18 for the period of 10 months from October 2017 till 31st March 2018 at the monthly rent of Rs. 65,000. The following is the tax deduction amount and date of deposit of TDS:

ParticularsAt the end of the FY 2017-18
Period of Tenancy6 months
Total Value of Rent Payable3,90,000
Value of Rent Paid in Last Month65,000
Amount Paid/ Credited3,90,000
TDS19,500 (3,90,000*5%)
Date of Payment/ Credit 31st March 2018
Date of deduction of TDS31st March 2018
Due date of deposit of TDS and filing of Form 26QCOn or before 30th April 2018

What are the penalties for non-deduction of tax and delay in deposit of tax?

  • In case of non-deduction of tax, an interest penalty of 1% per month is applicable from the date on which tax was deductible to the date on which such tax is deducted.
  • In case of nonpayment of TDS after deduction of TDS, an interest penalty of 1.5% per month is applicable from the date on which tax was deducted to the date on which tax is actually deposited i.e, date of filing Form 26QC.

FAQs

1. Who is responsible to deduct the TDS on Rent of Property u/s 194IB?

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

2. What is Form 26QC?

Form 26QC is the challan-cum-statement for reporting the transactions liable to TDS on rent under section 194IB of the Income-tax Act, 1961. It is an online form available on the TIN website.

3. What is Form 16C?

Form 16C is the TDS certificate to be issued by the deductor (Tenant of property) to the deductee (Landlord of property) in respect of the tax deducted and deposited as TDS on rent under section 194IB of the Income-tax Act, 1961