Did you know you may need to deduct and pay TDS on the rent paid for your residential house?
If not, this article will help you understand everything about TDS on rent of residential property.
- • Section 194IB requires an Individual and HUF who is not liable to get their accounts audited and are making payments of rent exceeding Rs. 50,000/- per month to deduct tax @ 5% on the total rent paid for the whole year and deposit it to the Government.
Ques: When are you required to deduct the above-mentioned TDS?
Ans: Individuals or HUF who are not liable to get their accounts audited need to deduct TDS at the time of credit or payment of rent to the account of payee (landlord) whichever is earlier for the last month of the financial year.
Therefore, TDS in this case needs to be deducted at the time of credit or payment of rent for the month of March.
Since it is now March, therefore remember to deduct and deposit TDS @ 5% on the amount of annual rent, if the rent paid by you for your own house exceeds Rs. 50,000/- per month. In case the tenancy is vacated during the year, the tenant is liable to deduct TDS at the time of last month of the tenancy. Therefore, the above-mentioned TDS is to be deducted and deposited only once every year.
Ques: What is the rate of TDS to be deducted and the amount on which TDS is to be deducted?
Ans: As per Section 194IB, individual/HUF who is not liable to get his books of account audited, needs to deduct TDS on the rent paid to a resident exceeding Rs 50,000 per month. This TDS is to be deducted @ 5% on the whole of the rent paid for the financial year. Another important point to be noted here is that if the landlord /recipient of rent does not have a PAN or if the PAN of the recipient is inoperative, the TDS shall be deducted at a higher rate of 20%. Also, if the recipient is a specified person as per section 206AB, then TDS will be deducted at twice the rate i.e at 10%.
Ques: What is the time-limit for deposit of TDS deducted u/s 194IB?
Ans: For payments u/s 194-IB, the TDS needs to be paid within 30 days from the end of the month in which TDS has been deducted. Since, the TDS needs to be deducted at the time of payment or credit of Rent for the month of March (i.e the last month of the financial year) therefore, the TDS is to be paid on or before 30 th April. A challan cum statement in Form 26QC must be filed for deduction and payment of TDS u/s 194IB. This Form 26QC is a challan as well as a return and no other return or form is required to be filed after filing and paying the TDS.
Ques: Whether TAN is required for payment of TDS on rent u/s 194IB?
Ans: The Govt. has not mandated TAN for deduction and payment of TDS U/s 194IB. Therefore, this TDS can be deducted and paid using only your PAN. The PAN of the payer as well as the recipient are required for deduction and payment of TDS in form 26QC.
Ques: What will be the amount on which TDS is deducted if the rent includes municipal taxes etc.?
Ans: The deduction of tax is to be done on the income of the recipient. Rent has been defined so as to mean any payment under a lease or tenancy agreement etc. for the use of any land or building. The rent paid excluding the taxes is the income of the recipient and therefore TDS is to be deducted only the amount of rent paid without any municipal taxes etc.
Ques: What are the situations covered u/s 194IB on which TDS is to be deducted?
Ans: As stated earlier, the TDS is to be deducted only by individuals and HUF who are not required to get their books of account audited. Therefore, this can cover the following situations:
- a. Where an individual or HUF pays rent for his or her residential house making a payment exceeding Rs. 50,000/- per month.
- b. Individual or HUF paying rent exceeding Rs. 50,000/- per month even for business premises or business purposes, if the books of account of such individual or HUF are not liable to be audited as per the Income Tax Act.
- c. Those persons who paying rent for their residential purposes/accommodation and are claiming the benefit of HRA exemption from their salary income must pay TDS if the rental exceeds Rs. 50,000/- per month.
- d. Therefore, Even the people who are salaried or retired and not carrying on any business or profession but are paying rent above Rs 50,000 per month, will have to deduct tax at source from such rental.
Ques: Where can I pay the TDS on rent u/s 194IB?
Ans: TDS u/s 194IB on rent can be paid electronically through the Income Tax website by filing form 26QC. Alternatively, the tax can also be paid offline through bank by filing the form 26QC through the IT website and submitting it to the bank. The payment can also be made through debit card.
Ques: What is the interest for late payment/deduction of TDS?
Ans: Late deduction of TDS: In case TDS has been deducted late the interest will be levied
- – At 1% per month or part of a month
- – On the amount of TDS from the date when tax is deductible to the date when the tax is deducted.
Late Payment of TDS:In case TDS has been deducted but not deposited, in that case interest will be levied - – At 1.50% per month or part of a month
- – On the amount of TDS from the date on which TDS was deducted to the date on which TDS was deposited.
Ques. What will be the TDS on rent paid to NRIs?
Ans: According to Section 195 of the Income Tax Act, the tenant should deduct TDS on rent paid to an NRI landlord for property located in India at the rate of 30% or the rate as applicable under the Tax treaty with the country of residence of the NRI whichever is beneficial to the NRI. However, for deducting TDS on rent, the tenant should have a TAN.
Ques: Can the TDS exceed the rent paid for month?
Ans: Even if the TDS is deducted at a higher rate, the amount of TDS cannot exceed the amount of rent payable for the last month of the financial year.
Ques: Is there any certificate to be issued on deducting TDS on rent u/s 194IB?
Ans: Yes, the person deducting the TDS on the rent is required to furnish Form 16C to the payee (Landlord) within 15 days from the due date of furnishing challan cum statement in Form 26QC.
(The author is a Chartered Accountant and can be contacted at info@youronlinefilings.in or capratikanand@gmail.com or Mobile: +91-9953199493)
