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Section 194IB – TDS on Rent of Property by Individual (2024)

TDS on Rent by Individual exceeding Rs.50000

Section 194IB talks about the provisions of TDS on rent by an Individual or HUF exceeding rupees fifty thousand per month. Here’s is a quick and complete guide on Section 194IB – TDS on Rent of Property by Individual.

What is Section 194IB of the Income Tax Act?

Section 194IB of the Indian Income Tax Act, requires individuals or HUFs who are paying rent to a resident for use of a land, building, or both, to deduct tax at source (TDS) at the rate of 5% on the rent paid.

This provision applies when the annual rent paid or payable exceeds Rs. 50,000 per month or part of the month.

Applicability of Section 194IB

As per Finance Act, 2017, “TDS on Rent” under section194IB is liable to be deducted by Individuals or HUFs (Hindu Undivided Family)*.

*Individual or a HUF who are not required to have tax audit as per Income Tax Act.

Meaning of Rent as per section 194IB

Rent for the purpose of section 194-IB means that any payment under any tenancy, lease, sub-lease or any other arrangement for below mentioned uses:

  • Building including factory building
  • Land
  • Land appurtenant to a structure including factory building
  • Machinery
  • Plant
  • Furniture
  • Equipment
  • Fittings

Person responsible to deduct TDS on Rent U/s 194IB

  • All individuals or HUFs (except those liable to tax audit under section 44AB),
  • Paying monthly rent to a resident exceeding Rs. 50,000 per month are liable to deduct TDS under section 194-IB.

Rate of TDS under section 194IB

As per the provisions of Section 194IB, with effect from June 1, 2017, tax at the rate 5% to be deducted by the Tenant (Payer or Lessee) at the time of making payment of rent to Landlord (Lessor or Payee).

How to deposit TDS U/s 194IB ?

Deducted TDS amount deducted has to be deposited to the Government or exchequer account online or through any of the authorised bank branches.

Tenant is require to deduct and deposit the taxes only once in a financial year, through a challan-cum-statement (Form 26QC). However, where the property is vacated during the year, the tax deduction should be done on the last day of the tenancy.

In other words, we can say that tax should be deducted at the end of the F.Y or in the month when the premise is vacating or termination of the agreement, whichever is earlier.

Due Date for Payment of TDS

As per the Section 194IB, due date for payment of TDS on rent is 30 days from the end of the month in which the rent is paid.           

Example: If the taxpayer has made deduction of rent in December, then the applicable TDS have to be deposited on or before thirty days, that is January 30th.

Tenant Duties & Responsibilities

  • Collect and verify the PAN of the Landlord
  • PAN of the Landlord and Tenant mandatorily to be submitted in the online Form for furnishing the rent information.
  • Ensure to quote the correct PAN or other details in the online Form.
  • Download TDS certificate (Form 16C) from TRACES website and issue to the Payee within 15 days from the due date of submitting of the challan-cum-statement in Form 26QC.
  • If the Payee (landlord) is a non-resident, liability to deduct TDS arises under section 195 of the Income-tax Act, 1961

Note: Tenant (Payer) is not required to procure TAN (Tax Deduction Account Number)

Penalty for non deduction of TDS or late deposit of TDS

Interest @ 1% per month will be levied if TDS is not deducted and 1.5% per month will be levied if TDS is deducted but not paid.

Penalty for delay in filing of Form 26QC

  • Delay in the filing of Form 26QC attract a late fee of Rs. 200 per day.
  • Also, there may be consequential penalties for non-filing.
  • For delay in issuing Form 16C (TDS Certificate), the penalty is Rs. 100 per day.

Key Points of Section 194IB for quick reference:

  • Applicable for TDS on payment of rent exceeding Rs.50000 p.m by an individuals or HUFs
  • TDS @5% is to deducted
  • Tax is to be deducted from total annual rent paid to the resident landlord by the tenant.
  • TDS to deducted once in the financial year at the end of the year or in the month when the premise is vacated or on termination of the agreement
  • Where the property is vacated during the year, the tax needs to be deducted on the last day of the tenancy.
  • Tenants do not need to have TAN

About Shubham Anand

Shubham Anand, the founder of TaxWinner.in, is a Chartered accountant, law graduate and personal finance & technology enthusiast. He loves writing about taxes, personal finance, tax planning, the latest technology, and much more. With a passion for technology and the intricacies of personal finance, he believes that financial literacy is the ultimate life hack.

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