TDS on Rent – Sec 194IB

TDS on Rent under section 194-IB is liable to be deducted by Individuals or HUF (other than those covered under section 44AB of the Act), responsible for paying rent to a resident exceeding Rs 50,000 for a month or part of a month during the previous year.

With effect from June 1, 2017, tax @5% from the rent payment should be deducted by the tenant of the property at the time of making payment of rent to the landlord within 30 days from the end of month in which deduction is made.

If the Landlord / Lessor/ Payee is a non-resident, liability to deduct TDS arises under section 195 of the Income-tax Act, 1961.

Is TAN required to report the TDS on Rent of property?

No, Tenant or Payer of the rent on property is not required to procure Tax Deduction Account Number (TAN). The Tenant is required to quote his or her PAN and PAN of the landlord.

How to pay taxes?

The tenant of the property has to furnish information regarding the transaction, online on the TIN website i.e www.tin-nsdl.com after successfully providing all the information.

Tenant/deductor can:

  • Either make the payment online (through e-payment option) immediately or
  • Make the payment subsequently through e-tax payment option (net-banking account) or by visiting any of the authorized 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).

How to select Challan?

  • Go to NSDL e-GOV website ( www.tin-nsdl.com )
  • Select TDS on Rent of Property.
  • Click on the option: “Online form for furnishing TDS on Rent (Form 26QC)”.
  • Select Form 26QC (Payment of TDS on Rent of Property)

What information to be filled in challan?

  1. Permanent Account Number of the Tenant and Landlord
  2. Address and contact details of the Tenant and Landlord as well as the Property being let out
  3. Financial Year will be populated on the basis of Date of Payment/Credit selected in the Form.
  4. Major Head Code – Indicates the type of tax applicable namely Corporation Tax (Companies) or Income Tax (Other than Companies) will be populated based on Landlords PAN. 
  5. Period of Tenancy
  6. Total Value of Rent Payable
  7. Value of Rent Paid in Last Month
  8. Date of Payment/Credit
  9. Amount Paid/Credited
  10. TDS Amount
  11. Date of Deduction
  12. Select the option for “e-tax payment immediately” if you want to pay taxes through your net banking account
  13. Select the option for “e-tax payment on subsequent date (e-payment of taxes by visiting any of the Bank branches)” if you do wish to pay the taxes by cheque or manual mode.”
  14. In case you have made a mistake in data entry, click on “EDIT” to correct the same. If all the detail and name as per ITD is correct, click on “SUBMIT” button.
  15. Ten digit alpha numeric Acknowledgment no. will be generated and you will be provided with an option to print an Acknowledgment slip.

Note :The name and status of PAN is as per the ITD PAN Master. You are required to verify the name before making payment. In case any discrepancy is observed, please confirm the PAN entered by you. Any change required in the name displayed as per the PAN Master can be updated by filling up the relevant change request forms for PAN. If the name is correct, then click on “Confirm”.

What is the periodicity of Filing the Form 26QC?

According to rule, Taxpayer/Tenant should furnish challan-cum-statement in Form 26QC in following scenarios:-

  • At the end of the FY or in the month when the premise is vacated / termination of agreement. However, taxpayer has to mandatorily file the Form at the end of each Financial Year (in case the agreement period contains more than one FY and rent has been paid/credited during the year)
  • In the month when the premise is vacated/ termination of agreement ( 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 11 months from October 1, 2018 to August 31, 2019 @ 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 2018-19 (on March 31, 2019) and secondly at the end of the tenancy period (on August 31, 2019). Following values will be captured in the below fields:

Particulars At the end of the FY At the end of the tenancy
FY 2018-19 2019-20
Period of tenancy 6 months 5 months
Total Value of Rent payable 3,60,000 3,00,000
Value of Rent paid in Last Month 60,000 60,000
Amount paid/credited 3,60,000 3,00,000
TDS @ 5% 18,000 15,000
Date of Payment/Credit 31-3-2019 31-8-2019
Date of Deduction 31-3-2019 31-8-2019
Due date of Filing Form 26QC On or before 30-4-2019 On or before 30-9-2019
Due date of furnishing Form 16C to the deductee/landlord On or before 15-5-2019 On or before 15-10-2019

Note: Form 16C is the TDS certificate to be issued by the deductor (Tenant of property) to the deductee (Landlord of property) in respect of the tax deducted and deposited as TDS on rent under section 194-IB of the Income-tax Act, 1961.

Example 2 (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, 2018 to November 30, 2018 @ rent of Rs. 80,000 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, 2018). Following values will be captured in the below fields:

Particulars At the end of the tenancy
FY 2018-19
Period of tenancy 6 Months
Total Value of Rent payable 4,80,000
Value of Rent paid in Last Month 80,000
Amount paid/credited 4,80,000
TDS @ 5% 24,000
Date of Payment/Credit 30-11-2018
Date of Deduction 30-11-2018
Due date of Filing Form 26QC On or before 31-12-2018
Due date of furnishing Form 16C to the deductee/landlord On or before 15-01-2019

What are the penalties of delay?

Non-compliance with the TDS provisions or failing to file TDS return on time or not deducting the right amount of tax can land you in trouble.

  • Implication of Non-deduction: Interest @ 1 % p.m. of such tax from the date on which such tax was deductible till the date on which such tax is deducted.
  • Implication of Non-payment: Interest @ 1.5% p.m. of such tax from the date on which such tax was deducted till the date on which such tax is actually paid.
  • Fees for Late Filing of TDS Return: Under section 234E, a fee of ₹ 200 per day would be levied for late furnishing of TDS statement from the due date of furnishing of TDS statement to the date of furnishing of TDS statement, maximum up to amount of tax deductible.
  • Penalty for failure to furnish TDS Return: Assessing officer may direct a person who fails to file the statement of TDS within due date to pay penalty minimum of Rs.10,000 which may be extended to Rs.1,00,000.
  • Besides penalty and interest, defaulters can also face imprisonment for a term which shall not be less than 3 months but may extend to 7 years along with fine.
  • For delay in issuing Form 16C, the penalty is Rs 100 per day.

What is Form 16C and where will I get the form?

Form 16C is the TDS certificate to be issued by the deductor (Tenant of property) to the deductee (Landlord of property) in respect of the tax deducted and deposited as TDS on rent under section 194-IB of the Income-tax Act, 1961.

Form 16C will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS) www.tdscpc.gov.in

How to download Form 16B?

  1. Register & login on TRACES portal ( www.tdscpc.gov.in ) as taxpayer using your PAN.
  2. Select “Form 16C (For Tenant)” under “Downloads” menu.
  3. Enter the details pertaining to the property transaction for which Form 16C is to be requested. Enter the Assessment Year, Acknowledgment Number, PAN of the Landlord and click on “Proceed”.
  4. After clicking on “Proceed” list of challan(s) will be available to download “Form 16C”.Details to be printed on Form 16C will reflect as per profile information on TRACES.
  5. Click “Submit Request” to submit request for “Form 16C”.
  6. A success message on submission of download request will appear. Please note the request number to search for the download request.
  7. Click on “Requested Downloads” to download the requested files.
  8. Search for the request with request number. Select the request row and click on “HTTP downloads” button to download Form 16C Zip file.