- As per the Finance Act, 2017, “TDS on Rent” under Section194IB is liable to be deducted by Individuals or HUFs (Hindu Undivided Family). After section 194IA, Government of India has inserted Section 194IB.
- The key objective of inserting this section is to curb tax evasion by landlords. In this article, we briefly discuss Section 194 IB of the Income Tax Act.
- Rent according to Section 194-IB refers to any payment under any tenancy, lease, sub-lease or any other arrangement for the below-mentioned uses:
- Building including factory building
- Land
- Land appurtenant to a structure including factory building
- Machinery
- Plant
- Furniture
- Equipment
- Fittings
Person responsible to deduct TDS
- All individuals or HUFs (except those liable to audit under clause a and b of Section 44AB) paying monthly rent to a resident more than Rs. 50,000 are liable to deduct TDS under Section 194-IB.
- Taxpayers should note that as per Clause a and b of Section 44AB, if the total sales, gross receipts or turnover from the business or profession of a HUF or an Individual exceed the monetary limits specified during the financial year immediately preceding the current financial year, the business establishment is liable to audit.
- Section 194-IB provides that for all the transactions with effect from June 1, 2017, tax at a rate of 5% should be deducted by the Tenant, Payer or Lessee at the time of making payment of rent to Lessor, Landlord or Payee. The tax deducted should be deposited to the Government Account through online by any of the authorized bank branches.
Filing form 26QC
- Form 26QC is the challan cum statement for reporting the transactions liable to TDS on rent under section 194-IB of the Income-tax Act.
- The taxpayer has to mandatorily submit the Form at the end of each Financial Year in case the agreement period contains more than one Financial Year and rent has been paid during the year
In case the agreement period falls in the same financial year, the taxpayer has to mandatorily submit the form in the month when the premise is vacated or when the termination of the agreement. - As per Section 194IB, the due date for payment of TDS on rent should be reckoned at 30 days from the end of the month in which the rent is paid.
