Section 194IB requires any person, being individual or HUF, other than those individual or HUF whose total sales, gross receipts or turnover from the business or profession exceeds Rs. 1 crore in case of business and Rs. 50 lakhs in case of profession in the financial year immediately preceding the financial year in which such rent was credited or paid, responsible for paying to a resident any income by way of rent, to deduct income tax @5%.
In case PAN is not available TDS @20% will be applicable.
Threshold Limit in Section 194IB
Under this section, tax has to be deducted at source only if the amount of such rent exceeds Rs. 50,000 for a month or part of a month during the previous year.
Time of Deduction
This deduction is to be made at the time of credit of such rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier.
No Requirement to Obtain TAN
The provisions of section 203A containing the requirement of obtaining Tax deduction account number (TAN) shall not apply to the person required to deduct tax in accordance with the provisions of section 194IB.
Meaning of Rent
“Rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.
Deduction Not to Exceed Rent for Last Month
Where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.
Frequency & Mode of Payment
Tenants must deduct and pay the tax to the government once per financial year. A challan-cum-statement, Form 26QC should be used to make this payment. Further, the tenant must provide Form 16C, a TDS certificate to the landlord as proof of the tax deposited.
Penalty for Non Deduction or Delay in Payment
In case of non-deduction of taxes, the tenant may have to pay a penalty that is equivalent to the amount of taxes deducted.
If the tax deposited to the government is delayed, penal interest at 1% for delay in deducting and depositing and 1.5% for delay in depositing tax will be levied.
In case of a failure on the filing Form 26QC within 30 days from the end of the month in which tax payment is made, will result in a late fee of Rs 200 per day.
How to Pay TDS under Section 194IB?
Latest Case Laws on Section 194IB