TDS on Rent

What is the rate of TDS under section 194-IB ?

• 5% of annual rent if PAN of landlord is provided

• 20% of annual rent if PAN is not provided 

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I am a Tenant, do I require to procure TAN to report the TDS on rent of Property ?

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.​

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When should TDS be deducted ?

• At the time of credit of Rent (for the march month in the previous year or the last month of the tenancy if property is vacated before march month), or

• At the time of payment of rent.

whichever is earlier

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What is the due date of payment of TDS deducted on payment of rent u/s 194-IB ?

• The due date of payment of TDS on rent is thirty days from the end of the month in which the deduction is made.

• 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.

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What is form 26QC ? 

Form 26QC is the challan-cum-statement for reporting the transactions liable to TDS on rent under section 194-IB of the Income-tax Act, 1961. It is an online form available on the TIN website.

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What is the periodicity of filling Form 26QC ?

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

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• 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, 2021 to August 31, 2022 @ 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 2021-22 (on March 31, 2022) and secondly at the end of the tenancy period (on August 31, 2022).

• 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, 2021 to November 30, 2021 @ 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, 2021).

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What is Form 16C ?

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.

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How will transactions of joint parties (more than one tenant/landlord) be filed in Form 26QC ?

• Online challan-cum-statement in Form 26QC is to be filed by each tenant for unique tenant-landlord combination for respective share.

  • Example 1 - In case of one tenant and two landlords, two forms have to be filed for respective rent shares, and

  • Example 2 - In case of two tenants and two landlords, four forms have to be filed for respective rent shares.

 

What is the procedure for furnishing TDS through the e-tax payment option immediately after providing the transaction details ?

​Step 1

• Log on to Protean-TIN website (www.tin-nsdl.com). 

• Click on the option “Online form for furnishing TDS on Rent (Form 26QC)”.

• ​Select Form 26QC (Payment of TDS on Rent of Property)

Step 2​

• ​After selecting the form you will be directed to the screen for entering certain information. like:

  • ​Permanent Account Number of the Tenant and Landlord

  • Address of the Tenant and Landlord as well as the Property being let out

  • Financial Year will be populated on the basis of Date of Payment/Credit selected in the Form.

  • Major Head Code - Indicates the type of tax applicable viz; Corporation Tax (Companies)/ Income Tax (Other than Companies) will be populated based on Landlords PAN

  • Total Value of Rent Payable

  • Period of Tenancy

  • Date of Payment/Credit

  • Date of Deduction

  • Amount Paid/Credited

  • TDS Amount

  • Select the option for “Payment of taxes immediately”

It is important to ensure that PAN of Tenant and Landlord are correctly mentioned in the form. There is no online mechanism for subsequent rectification. Deductor will have to approach the TDS - Assessing Officer or CPC-TDS for rectification of errors.

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Step 3

• After entering all the above detail, click on PROCEED button. The system will check the validity of PAN. In case PAN is not available in the database of the Income Tax Department then you cannot proceed with the payment of tax.

• If PAN is available then TIN system will display the contents you have entered along with the “Name” as per in the ITD database with respect the PAN entered by you.

• If PAN of the landlord is not available, please select the option Permanent Account Number Not Available. In such case, TDS has to be deducted under the provisions of section 206AA of the Income-tax Act, 1961 i.e. at higher rate of 20%, subject to a maximum amount equivalent to the amount of rent paid for the last month of the previous year or the last month of the tenancy, as the case may be.

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Step 4

• You can now verify the details entered by you. 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. Ten digit alpha numeric ACK no. will be generated and you will be directed to the net-banking site provided by you.

• Please be informed that 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".

Step 5

• After confirmation an option will be provided for submitting to Bank. On clicking on Submit to Bank, deductor (as per the mode of payment selected while filling the form) will have to key in the debit card details or login to the net-banking site with the user ID/ password provided by the bank for net-banking purpose and enter payment details at the bank site.

• On successful payment a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.

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