What is TDS on Rent u/s 194IB?
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) has to deduct as well as deposit TDS on monthly rent if rent paid exceeds INR 50,000 and also the landlord is a resident of India.
What is the rate of TDS u/s 194IB?
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%. However, the tenant is not required to obtain TAN for TDS deduction on rental payments.
This could be understood better using a table as shown below:
|Particulars||Rate of TDS u/s 194IB|
|If PAN of the landlord is available||5%|
|IF PAN of the landlord is not available||20%|
Who needs to deduct TDS on rent?
Tenant needs to deduct TDS on rent of the property before making payment of rent every month. Let’s take an example to understand better: Suppose, 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 which is 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 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:
|Particulars||At the end of the FY 2017-18|
|Period of Tenancy||6 months|
|Total Value of Rent Payable||3,90,000|
|Value of Rent Paid in Last Month||65,000|
|Amount Paid/ Credited||3,90,000|
|Date of Payment/ Credit||31st March 2018|
|Date of deduction of TDS||31st March 2018|
|Due date of deposit of TDS and filing of Form 26QC||On 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.
- Likewise, 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.
The tenant of the property being an individual or a HUF (not liable to audit u/s 44AB) would have to deduct the TDS as well as deposit the same in Government treasury.
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 as well as deposited as TDS on rent under section 194IB of the Income-tax Act, 1961
The tax deductor is not required to apply for TAN in order to deduct TDS U/S 194IB. CBDT has notified form 26QC filling return under this section & this form is PAN based.