Section-194IB TDS on Rent Paid by Individual/HUF

A new Section 194IB has been Introduced in the Income Tax Act with effect from 1st June 2017 extending the scope of TDS on Rent which shall be discussed in this article in brief.

Section-194IB

To Widen the Tax base and to Curb the Tax evasions by the landlords and owners of property, Government of India has extended its scope of deducting Tax on rent paid by an individual or a Hindu undivided family (HUF) by introducing a new section 194IB in the Income Tax act, 1961, vide Finance Act, 2017 with effective from 1st June 2017.

Provision of Section 194IB

As per the Provisions of section 194IB any person, being an individual or a Hindu undivided family (other than the persons referred to in the second proviso to section 194-I), responsible to pay any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year to a resident, shall deduct a tax at the rate of five per cent of such income.

Scope and Applicability of Section 194IB

Section 194IB shall be made applicable if the following conditions are satisfied:

  • Rent should be paid by an Individual/HUF.
  • Such Rent paid Should exceed Rs.50,000/- for a month or part of the month.
  • Such Individual or HUF should be other than the person as covered under section 44AB(a) or 44AB(b).

Rate of TDS

As per the provisions of section 194IB with effect from 1st June 2017, there shall be deducted a Tax at the rate of 5% on the Rent Paid by such Individual or HUF.

Who is Required to Deduct TDS?

A Tenant or any other person being an Individual or HUF other than the persons covered under section 44AB(a) and 44AB(b)are responsible to deduct TDS on the Rent paid by such person if such rental amount exceeds Rs.50,000/-.

What amount shall be defined as Rent under section 194IB?

Rent Shall be any amount made for the use of any land or building or both under the following name 

  • Lease
  • Sub-lease
  • Tenancy
  • Any other agreement or arrangement.

When to deduct TDS under section 194IB?

The Tax shall be deducted under section 194IB at the earlier of the following dates.

  • at the time of credit of rent amount for the last month of the previous year or the last month of the tenancy (in case the property is vacated).

                                                            Or

  • at the time of making payment in cash or by the issue of a cheque or draft or by any other mode.

Form 26QC

A Form 26QC is a challan cum statement which is used to deposit the tax deducted under section 194IB. 

The TDS so deducted under the provisions of section 194IB is required to be deposited to the credit of government within the period of 30 days and it should be accompanied with Form 26QC.

Generally, Form 26QC is required to be submitted once at the end of the Financial Year. But under the following cases Form 26QC is required to be submitted earlier:

  • In case of vacating the property before year-end then Form 26QC is required to be submitted in the month when such property is vacated.
  • In cases where the period of agreement contains more than one Financial Year, then Form 26QC is required to be submitted more than once i.e. at the end of each Financial Year.

TDS Return

Form 16C

Form 16C is nothing but a TDS certificate which is similar to Form 16 & 16A issued to the payee when TDS under section 194-IB is deducted by the payer. Form 16C acts as a proof for a payee that TDS so deducted has been deposited on his behalf to the credit of the government. 

Form 16C is required to be issued within 15 days from the date of filing of Form 26QC.

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