Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Friday, December 22, 2017

TDS on Rent by Individual/HUF – Section 194IB for payment of rent above Rs50000/- per month

The CBDT amended the rules relating to TDS as “TDS on Rent u/s 194I” and inserted one more section “194IB” w.e.f 1st June 2017 to make provisions relating:
Deduction of TDS @ 5% on rent payable by an Individual or a HUF  Rs 50000/- or more per month to a resident for a month or part of the month.
The points to be noted here are:-

1.       TDS @ 5% is deductible from the rent paid or payable.

2.       The rate of TDS shall be increased to 20% if the person receiving rent doesn't furnish the details of his PAN, subject to maximum limit of amount of rent payable for the month of march (last month of the previous year) or last month of tenancy as the case may be.
3.       The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

4.       In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the month of March (last month of the previous year) or the last month of the tenancy, as the case may be.  
      Persons required to deduct TDS under section 194IB

·         Individual and HUF who are not required to get his books of accounts audited due to the turnover or gross receipts not exceeding Rs 1 crore or Rs 50 Lakh in case of business or profession respectively.
·         Individual and HUF who are required to get his accounts tax audited under Section 44AB. These cover individual and HUF who are reporting profit lower than the presumptive basis.

In other words only individuals and HUF who are required to get his accounts audited due to turnover or gross receipts higher than specified limits are not covered under this section, all other individuals and HUFs are covered in this section.
Other Points

·         Even salaried person or person who doesn’t have any income is covered under section 194IB.
·         Other Individuals and HUF which not covered under this section, company, partnership firm, AOP and BOI are required to deducted TDS from rent under Section 194I

Difference between section 194I and section 194IB

Basis
Section 194I
Section 194IB
Applicability
– Every person paying rent (except individual & HUF)
– Individual & HUF if doing business and covered in tax audit in last year immediately preceding the financial year in which income by way of rent is credited or paid.
Every Individual & HUF not covered in 194-I
Property Covered
Only Commercial property covered
Commercial and residential property both covered.
Applicable Threshold Limit
Rs. 1,80,000 Per annum
Rs. 50,000 per month or part of the month during financial year
TDS Rate
10%
5%
TAN requirement
TAN is required
TAN is not required. PAN is required.
Payment and Return
Monthly Payment and Quarterly Return in form 26Q for all payments other than salary are covered in one form.
Payment and Return once in a year but multiple forms are to be filed  as per number of Agreement, number of landlords.

The TDS deducted by tenants u/s 194IB shall be deposited through a challan-cum-statement in Form No.26QC electronically in accordance with the procedures, formats and standards specified under sub-rule (5) within 30 days from the end date of tenancy period or March 31 whichever is earlier.
The tenant would also be required to issue a Tax Withholding Certificate, Form 16C, to the landlord, as a proof that taxes have been deposited in his name. Form 16C, TDS Certificate  To be provided within 15 days from the due date for furnishing Form 26QC.

How Often Should one File Form 26QC?

According to rule, Taxpayer/Tenant should furnish challan-cum-statement in Form 26QC
·         At the end of the FY (in case the agreement period contains more than one FY and rent has been paid/credited during the year).
At the end of the month when the premise is vacated or the agreement is terminated ( in case the agreement period falls in the same FY).
Example 1:
(Rent Agreement falling across two FY):-
Tenant Mr. A has entered into a tenancy agreement with Landlord Mr. X for the period of 17 months from April 1, 2017 to August 31, 2018 @ rent of Rs. 60,000.
Explanation: – In this case, Mr. A should file Form 26QC twice i.e. firstly at the end of the FY 2017-18 (on March 31, 2018) and secondly at the end of the tenancy period (on August 31, 2018). Following values will be captured in the below fields:-
Particulars
At the end of FY 2017-18
At the end of tenancy
Period of Tenancy
12  Months
5 Months
Total Value of Rent Payable
Rs 7,20,000
Rs 3,00,000
Rent paid in last month
Rs 60,000
Rs 60,000
TDS amount @ 5%
Rs 36,000
Rs 15,000
Due date of filing form 26QC
On or before 30th April 2018
On or before 30th Sep 2018
TDS certificate in Form 16C
On or before 15th May 2018
On or before 15th Oct 2018
Note:  If the rent is increased during the financial year to cross the limit of Rs. 50,000/-, the calculation relating to TDS shall remain the same as above since the  liability to deduct TDS is determined considering the amount of rent paid in the last month, and TDS is deducted on the gross value of rent paid during the period. The following example shall clarify the same:-
Example 2:
Mr. Z entered into a tenancy agreement with Landlord Mr. D for the period of 36 months from May 1, 2017 to April 30, 2020 @ rent of Rs. 35,000. The rent was increased to Rs.55000/- with effect from 1st December 2017.
The calculation relating to TDS for the FY 2017-18 will be done as follows:-
Particulars
At the end of FY 2017-18
Period of Tenancy
11  Months
Total Value of Rent Payable
Rs 4,65,000/-
Rent paid in last month
Rs 55,000
TDS amount @ 5%
Rs 23,250/-
(5% of 4,65,000/-)
Due date of filing form 26QC
On or before 30th April 2018
TDS certificate in Form 16C
On or before 15th May 2018

Example 3:
(Rent Agreement falling in same FY):- 
Tenant Mr. B has entered into a tenancy agreement with Landlord Mr. Y for the period of 6 months from June 1, 2017 to November 30, 2017 @ rent of Rs. 70,000 for 6 months
Explanation: – In this case, Mr. B will have to file Form 26QC only once i.e. at the end of tenancy period (on November 30, 2017). Following values will be captured in the below fields:
Particulars
At the end of Tenancy
If Renewed with same landlord with increase in rent with 10% or at same rent
Period of Tenancy
6  Months
10  Months
Total Value of Rent Payable
Rs 4,20,000/-
Rs 7,28,000/-
Rent paid in last month
Rs 70,000/-
Rs 70,000/- for 6 months and Rs.77000/- for 4 months.
TDS amount @ 5%
Rs 21,000/-
Rs 36,400/-
Due date of filing form 26QC
On or before 30th Dec, 2017
On or before 30th April, 2017
TDS certificate in Form 16C
On or before 14th Jan, 2018
On or before 15th May, 2018

Filing Multiple 26QC Forms


Form 26QC needs to be filed more than once in the following situations:-
·         If a person vacate one house and move to another and rent of both houses are more than Rs. 50,000 then Form 26QC is to be made twice in a year for each property owner. In other words, Form 26QC is to be filled by each tenant for unique tenant-landlord combination for respective share. For example:-
·         In case of single tenant and single landlord, only one form is require to be filled.
·         In case of single tenant and two landlords, two form is required to be filled for respective shares.
·         In case of two tenant and two landlords, four form is require to be filled for respective shares.
·         As deduction is required once a year, so payment is also required to be deposited to Government only once a year. However if tenant is require to file more than one form then separate payment should be made for each form.

How to fill challan cum statement in form 26QC


Go to https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp and then click on Form 26QC. The form will now get opened. Please take care that this page also expires if remains inactive for some time.
Details required to fill form 26QC
·         PAN of landlord and tenant’s PAN
·         Address of both landlord and tenant
·         Address of let out Property
·         Period of Tenancy
·         Total amount of rent payable
·         Rent paid or payable for the month of March or the last month of tenancy
·         Interest or late fees payable
·         Date of tax deduction
·         Payment can be made using net banking at time of filing form 26QC or can be made afterwards by using e-payment on subsequent date or by visiting any Authorized bank branches after filing form 26QC.

Interest and Penalties


Interest
Interest is chargeable on short payment/late payment of TDS. There can be following scenarios:-
·         When TDS is not deducted
Interest at the rate of 1% per month or part thereof, for the period from the date on which TDS is deductible  to the date on which TDS is actually deducted.
·         When TDS is deducted but payment is made lately
Interest at the rate of 1.5% per month or part thereof, for the period from the date on which TDS is actually deducted to the date on which such TDS is actually paid.
Penalty
·         Late filing fee of Rs 200 per day under section 234E
A penalty of Rs. 200 per day under section 234E is levied for late filing of form 26QC. The total late filing fees should not exceed the total amount of TDS which is require to be deducted.
·         Penalty ranging Rs 10,000 to Rs 1,00,000 under section 271H
If the TDS statement is not filed within one year from the due date of furnishing of TDS return, then a minimum penalty of Rs 10,000 (which can go upto Rs 1,00,000) can be levied. The penalty under this section will be in addition to the late filing fee of Rs 200 per day under section 234E.
Section 271H also cover cases of filing incorrect TDS/TCS return such as furnishing incorrect details in the statement filed like PAN, Challan and TDS Amount etc . Similarly minimum penalty of Rs 10,000 (which can go upto Rs 1,00,0000) can be levied.
·         Penalty on late issuing of TDS Certificate
Penalty of Rs 100 per day shall be payable for any delay in issuing TDS certificate. The total late issuing fees should not exceed the total amount of TDS which is require to be deducted.

FAQs

What is TDS on rent paid :
Newly inserted section 194 IB effective from 01.06.17 provides that Tenant of a property making monthly rent payment exceeding ₹ 50, 000 per month or part of month  is required to deduct tax at the rate of 5% from the rent payable to a resident landlord.

Who is liable for TDS under Section 194 IB
The tenant of the property being an individual or a HUF (not liable to audit u/s 44AB) would have to deduct the TDS and deposit the same in form 26QC under Section 194IB. The Individual or HUF subjected to Tax audit are covered under Section 194 I.

What is the due date of payment
The due date of payment of TDS on rent is thirty days from the end of the month in which the deduction is made.
The deduction is to be made from payment of last month rent in March if tenancy continues and last month of the tenancy period if agreement ends with in the financial period.
Example: If a taxpayer has made payment of rent in the month of December, then corresponding TDS should be deposited on or before thirty days i.e. January 30th.
How can the form 26QC filed and payment can be made
The Tenant of the property has to furnish information regarding the transaction, online on the TIN website i.e. www.tin-nsdl.com in Form 26QC and after successfully submitting the same can make payment in the following manner :
i)  Either make the payment online (through e-tax payment option) immediately; Or
ii) Make the payment subsequently through e-tax payment option either themselves through e banking or through bank branches. However, such bank branches will make e-payment without digitization of any challan. The bank will get the challan details from the online form filled on TIN website(www.tin-nsdl.com)  
Whether printout can be taken later after filing 26QC  & TDS can be paid later.
Yes. The deductor ( tenant) can opt “E-tax on subsequent date” on the TIN website. On entering the details as per the acknowledgment slip, deductor will be provided options to Print the Form 26QC.

What is form 16C and how it can be provided to landlord
Form 16C is the TDS certificate to be issued by the deductor (Tenant of property) to the deductee (Landlord of property) for the amount of the tax deducted and deposited as TDS on rent under section 194-IB.
Form 16C will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS), www.tdscpc.gov.in after log in and entering the profile of the tenant and landlord.

Compiled by Ms Saino  Susan Varghese Article Assistant at Sandeep Ahuja & Co

1 comment:

  1. HI,
    Thanks for posting a very detailed article. I have a query. I along with my husband are co-owners of a property that we lease out to tenants. The rent is around 70000/-. But each of us claim 50% of the rent (35000/- ea) received and file our returns accordingly. Does our tenant still need to deduct TDS??

    ReplyDelete