FAQ’s on TDS Under Section 194-IB

By / / Income Tax

1. Section 194-IB of the Income Tax Act, 1961

Section 194-IB contains provisions relating to TDS on payment of rent by individuals or HUF not covered under Section 194-I.

2. Who should deduct TDS under section 194-IB?

Tax should be deducted under section 194-IB by an individual or HUF whose turnover/gross receipts does not exceed 1 crore or 50 lakhs respectively during the Financial year immediately preceding the financial year.

3. What is the difference between section 194-I and section 194-IB?

  • Both the sections contain provisions relating to deduction of tax on rental payments.
  • The main differences being,
    1. Person responsible to deduct tax:
      • Individuals/HUF whose turnover/gross receipts in the preceding financial year does not exceed Rs. 1 crore or Rs. 50 lakhs respectively need not deduct any TDS while making rental payments under section 194-I.
      • However, under section 194-IB, individuals/HUF whose turnover /gross receipts is below the above mentioned limit should also deduct TDS if the amount of rent paid by them exceeds Rs. 50,000 per month.
    2. Type of rental payments covered:
      • Under section 194-I – Rent from letting out of plant, machinery, Land, building, furniture & fittings
      • Under section 194-IB – Rent from letting out of land & building only
  • Possession of Tax deduction account number (TAN) by the tax deductor:
    1. Under section 194-I – TAN required for deducting TDS
    2. Under section 194-IB – TAN not required

4. When should tax be deducted under section 194-IB?

  • At the time of credit of rent, (for the last month of the previous year or the last month of the tenancy, if the property Is vacated during the previous year) (or)
  • At the time of payment of rent (whichever is earlier)

5. Who should deduct tax under this section?

Individual or HUF (other than those covered under section 194-IA) responsible for paying rent to a resident.

6. What is the maximum limit upto which no tax needs to be deducted under this section?

No tax needs to be deducted if the amount of rent paid does not exceed Rs. 50,000 per month or part of a month.

7. What is the rate at which tax is deducted under this section?

  • Tax is deducted at the rate of 5% on the amount of rent paid.
  • If PAN of the deductee is not available, tax shall be deducted at the rate of 20% (the amount of tax deducted under this provision should not exceed the amount of rent payable for the last month of the financial year)

8. Is it mandatory to obtain a tax deduction account number (TAN) for the purpose of deducting tax under section 194-IB?

The requirement of obtaining TAN (section 203A) shall not apply to the person required to deduct tax in accordance with the provisions of section 194-IB.

9. What is the rate of TDS if the rent is paid to a non-resident landlord?

  • Tax is to be deducted on the rent paid to a non-resident under section 195.
  • The rate of TDS is 30% plus surcharge (if applicable) and cess.
  • There is no threshold limit for non-applicability of TDS for non-residents.
  • i.e. Tax has to be deducted on the rent paid even if the amount is less than Rs. 50,000

10. Will the deductor require a TAN (Tax deduction account number) for the purpose of deducting tax under this section?

No, the person responsible to deduct tax is not required to possess a tax deduction account number for the purpose of deducting tax under this section.

11. What is the due date for payment of tax deducted under this section?

30 days from the end of the month in which the deduction is made and shall be accompanied by a challan cum statement in Form No 26QC.

12. What is Form 26QC?

  • Form 26QC is an online, challan cum statement for reporting transactions under section 194-IB. It is available on the TIN-NSDL website.
  • It should be filled and filed by the person responsible to deduct TDS under this section within 30 days from the end of the month in which tax is deducted.

13. Who should file Form 26QC in case of joint tenants?

In case of two tenants, two Form 26QC has to be filed separately in respect of the rent paid by each tenant as per their agreement with the landlord.

14. Is PAN of the landlord and tenant mandatory for filing Form 26QC?

Yes, quoting of PAN of both the landlord and the tenant is mandatory for the purpose of filing Form 26QC.

15. What is Form 16C?

  • Form 16C is a TDS certificate to be issued by the deductor (tenant) to the deductee (landlord) confirming the deduction and payment of tax under section 194-IB.
  • It will be generated within 15 days from the date of furnishing the challan cum statement in Form 26QC.

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