Section 194IB under TDS in case rent paid exceeds Rs.50,000

Last Updated On: June 22, 2020, 1:34 p.m.
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SECTION 194IB UNDER TDS

Finance Act, 2017 has introduced new section 194IB which has been included in the Income Tax Act for all the individual who is staying in a rented house/flat, where the rent amount exceeds more than Rs.50,000 per month. This provision came into existence from 1st July 2017.

This provision is applicable to all the individual or HUF who is paying rent of Rs.50,000. As per section 191, any individual or HUF who is required to get his books of accounts audited under section 44D is not required to deduct tax under section 194IB.

 RATE OF TDS:

  • The payee has to deduct TDS at the rate of 5% on the rent amount paid.
  • In case if there is no PAN served by the recipient, then TDS is deductable at 20% subject to maximum limit rent payable in the month of March or the last month of the tenancy.

TDS NEED TO BE DEDUCTED UNDER THE FOLLOWING CIRCUMSTANCES:

TDS needs to be required once in a year and not every month. TDS has to be deducted at earlier from the following:

  • In case where the time of rent credited to the account of payee for the month of March or the last month of tenancy, if the property is vacated during the year.
  • In case where the time of payment of rent to the payee for the month of March or last month of tenancy, if the property is vacated during the year.

DUE DATE FOR PAYMENT OF TDS:

The payment is to be made by the tenant by using the form 26QC which is a challan cum statement within 30 days from the end of the month in which deduction is made. In case if the rent payment is made in the month of March, then TDS is deductible till 30th April.

Other important points to be considered:

  • In case if the person vacates the house and move to another house and rent of both houses are more than Rs.50,000 then in such cases, Form 26QC is to be made twice in a year for each landlord. In other words, the tenant needs to file form 26QC for each landlord.
  • In case of a single landlord and single-tenant, then Form 26QC is required to be filed only once in a year.
  • In case of two landlord and single tenant two forms are to be filed in the respective share of the landlord.
  • In case of two landlords and two tenants, four forms are to be filed in the respective share.
  • In case the form is to be filed more than once then the payment is also need to be made more than one time as for each landlord for their respective share a separate payment is to be made.

 

Where is the Form 26QC and Form 16C available?

  • Form 26QC shall shortly be available on the TIN NSDL website of the Income-tax department in the coming months

        (www.tin-nsdl.com).

  • Form 16C shall shortly be available on the TRACES website of the Income-tax department in the coming months

       (www.tdscpc.gov.in).


 

TYPES OF PAYMENT COVERED UNDER SECTION 194IB:

Under section 194IB, payment of rent to a resident landlord for use of any land or building or both exceeding Rs.50,000 per month is liable for a tax deduction.

  • Under this section, if the Payment is made under the terms of lease, sublease, tenancy or any other agreement or arrangements for the use of any land or building or both are also covered
  • Rent payment for plant and machinery, equipments, furniture, and fittings, etc are covered under section 194I.
  • If payment is made to non-resident then TDS is deductible under section 195.
  • A refundable security deposit made to the landlord at the time of taking property on rent by the tenant should not be covered under this section.

 

Is TAN required for the person deducting TDS?         

No, TAN is not required for such person while deducting TDS.

 

PENALTY FOR NON-DEDUCTION OF TAX and DELAY IN DEPOSIT OF TAXES:

In case of non-deduction of tax, the tenant may be required to pay a penalty equal to the amount of taxes not withheld.

If the tenant delays in deposit of taxes withheld, he may be liable to pay penal interest at the rate of 1% where there is a delay in deducting and depositing the tax or 1.5% per month where tax is deducted but there is a delay in depositing the same.

 

Instructions for the Tenant (Lessee/Payer):

  1. This advice slip must be presented to the bank or to the person who is making an e-payment on your behalf.
  2. All the payments should be made to credit of the Income Tax Department through e-mode only.
  3. The total Payment should be rounded off to the nearest Rupee.
  4. Ensure that the payment is made is the same amount as mentioned above.
  5. The Acknowledgement Number generated will be valid only if the taxpayer makes a payment at Bank's site. Taxpayer is recommended to save the above Acknowledgement number for downloading Form 16C from the TRACES website.
  6. As communicated by the Tax Department, the TDS certificate i.e Form 16C will be available for download from the TRACES website after at least 2 days of deposit of tax amount at the respective Bank.
  7. If the Date of deduction is greater than the Date of Payment/Credit, the same may result in Demand Notice for the late deduction.
  8. If the Date of deduction is less than Date of Payment/Credit, the same may result in Demand Notice for the late deduction.
  9. If the Date of furnishing Form 26QC exceeds the prescribed due date, the same may attract the late filing fee under section 234E.

 

OTHER POINTS TO BE CONSIDERED:

  • In case of payment of tax online, the taxpayer will select the relevant challan i.e. ITNS 280/281/ 282/283/285/286/287 or Form 26QC as applicable.
  • Enter his or her PAN / TAN as applicable. Further, taxpayer will select the required Tax applicable, Type of Payment, Nature of Payment and Assessment/Financial Year as displayed on the screen.
  • Apart from the aforementioned details, the taxpayer is required to enter the address details (such as City, Pin Code, State, etc.).
  • Two modes of payment options will be available to the taxpayer i.e. Net Banking or Debit card of the selected bank. The taxpayer can choose the available payment options.
  • After entering the above details and selecting the required Bank, the taxpayer will be prompted to enter the text (CAPTCHA) as displayed on the screen. On successful matching of CAPTCHA text, if the taxpayer clicks on the 'Proceed' button, the confirmation screen gets displayed.
  • On the confirmation screen, non-financial/financial details entered by the taxpayer at first screen along with the Name of the taxpayer as per the database of the Income Tax Department will be displayed to the taxpayer.
  • After ensuring the correctness of the details displayed, the taxpayer can proceed to make the tax payment.
  • Upon confirmation, the taxpayer will be redirected to the Banks payment gateway i.e. Debit Card/Net Banking web page. Taxpayer will login to the net-banking site with the user ID/ password provided by the bank for the net-banking purposes. In case the taxpayer has selected the Debit Card option, he or she will enter the required card details.
  • On successful payment, a challan counterfoil will be displayed containing CIN (Challan Identification Number), payment details, and bank name through which e-payment has been made. This counterfoil is proof of payment being made.

 

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