Scope of Section 194-IB:
- If an individual or a HUF is responsible for paying to a resident any income by way of rent exceeding Rs. 50,000 for a month or part of a month during the previous year need to deduct TDS under section 194IB.
- An individual or HUF who is not liable for audit u/s 44AB, will have to deduct TDS. Such TDS will have to be deducted when they are paying income of rent to any resident in the year.
Rent Means Specify under section 194IB:
As per section 194IB rent means a payment made by a payee under a tenancy, lease, sub-lease, or any other arrangement made for assets such
- Land including a factory building
- Land
- Building including a factory building
- Machinery
- Furniture
- Equipment
- Plant
- Fittings
- The payee may or may not own the assets mentioned above.
Point of Time for Deduction:
TDS needs to be deducted, earlier of:
- Credit / Payment of rent for last month of the year or last month of tenancy if property is left during the year (Or)
- At the time of payment by cash, cheque or any other way
Rate of Tax under section 194IB:
- The tax rate applicable is 5%, in case the rent payment exceeds Rs 50,000 and the landlord’s PAN is provided.
- TDS of 20% will be applicable if the landlord’s PAN is not provided.
Time limit on depositing TDS:
- TDS is required to deposit under section 194IB with challan cum statement in the specified FORM 26QC.
- The TDS deducted needs to be deposited within 30 days and should accompany Form 26QC.
- The tenant must provide Form 16C, a TDS certificate to the landlord as proof of the tax deposited.
- A tax deduction account number (TAN) is not necessary to make the transaction.
Now, Form 26QC is generally required to be submitted once, at the end of FY. But there can be some scenarios in which it needs to submit early. These are:
- If you are vacating property before year the end then it is to be submitted in the month when the premise is vacated.
- In case your agreement period contains more than one FY, then you have to submit this form more than once i.e. at the end of each Financial Year.
- The tenant must provide Form 16C, a TDS certificate to the landlord as proof of the tax deposited.
Let us Understand it even Better Through an Example:
Case-1: Santosh entered into an agreement for 11 months from 01/09/2021 to 31/07/2022. Rent amount is Rs 80,000 per month. Here How to file the Form 26QC ?
Solution
| Particulars | First return ( At the End of FY) | Second Return (At the End of Agreement) |
|---|---|---|
| Financial Year | 2021-22 | 2022-23 |
| Period | 7 Months | 5 Months |
| Total Rent Paid | 5,60,000 | 4,00,000 |
| Rent of Last Month | 80,000 | 80,000 |
| TDS u/s 194IB | 28,000 | 20,000 |
| Date of Payment/credited | 31-03-2022 | 31-07-2022 |
| Date of TDS Deduction | 31-03-2022 | 31-07-2022 |
| Form 26QC | On or Before 30th April, 2022 | On or Before 30th August, 2022 |
| Form 16C | On or Before 15th May, 2022 | On or Before 15th September,2022 |
Case II: Santosh has entered in a rent agreement for a period of 6 months from 1/7/2021 to 31/12/2021. Rent amount is Rs 80,000 p.m. Here, Form 26QC will be filed only once.
Solution
| Particulars | First Return (At the End of FY) |
|---|---|
| Financial Year | 2021-22 |
| Period | 6 Months |
| Total Rent Paid | 4,80,000 |
| Rent of Last Month | 80,000 |
| TDS u/s 194IB | 24,000 |
| Date of payment/ credit | 31-12-2021 |
| Date of TDS Deduction | 31-12-2021 |
| Form 26QC | On or before 31st January, 2022 |
| Form 16C | On or Before 15th Feb, 2022 |
Penalty is Applicable in the Case of Non-deduction or Delay:
- If the tax deposited to the government is delayed, penal interest at 1% for delay in deducting and depositing and 1.5% for delay in depositing tax will be levied.
- In case of a failure on the filing Form 26QC within 30 days from the end of the month in which tax payment is made, will result in a late fee of Rs 200 per day.
