Form 16C: TDS Certificate On Rent And Challan 26QC

Let us help you learn more about Form 16C and Challan 26QC for deducting TDS on rent. In order to bring the high rental income group within the tax ambit, the government in the Budget 2017 inserted a new Section 194IB. Under this Section, individuals and HUFs who pay monthly rent of Rs 50,000 or above will have to deduct TDS at the rate of 5%. This section is effective from 01.06.2017.

Generally TDS deduction requires TAN registration; however, in certain cases in order to make the compliance process simpler CBDT permits individuals and HUFs to quote their PAN for a tax deduction.

But now such an individual or HUF are also required to deduct TDS at 5%, if the payment of rent is Rs 50,000 or above. 

TDS u/s 194IB is to be deducted only if payment is made to the resident. In case rent is paid to non-resident owners, TDS u/s 194IB shall not be deducted, the same is to be done u/s 195 at the applicable income tax slab rates.   

When To Deduct TDS?

TDS is to be deducted once in a financial year. It can be either deducted at the time of credit of the rent to the account of the payee (landlord) for the last month of the financial year OR the last month of the tenancy if the property is vacated during the year. It can also be deducted at the time of payment, whichever is earlier.

Submit Challan 26QC For Payment Of TDS

The TDS deducted should be paid within 30 days from the end of the month in which the tax was deducted. It shall be accompanied by a challan (cum) statement in Form 26QC. The TDS, so deducted, can be paid to the government electronically through the Reserve Bank of India, State Bank of India, or any other authorised bank.

Furnish Form 16C As Certificate For TDS Deduction To Payee

Form 16C is a new TDS certificate introduced by the government of India. It reflects the amount of TDS deducted on rent at 5% by the individual/HUF (u/s 194IB).  It is just like Form 16 or Form 16A issued in the case of salary and other payments respectively. The person deducting the TDS on the rent is required to furnish Form 16C to the payee within 15 days from the due date of furnishing challan cum statement in Form 26QC, it consists of  details of rent payments and TDS made thereon.

Example: 

Hannah, who is a salaried employee, is paying a rent of Rs 58,000  per month. She He deducted the TDS @5% for the whole year in the month of March. The amount of TDS comes out to be Rs. 34,800 (6,96,000*5%) . Now this TDS should be deposited along with Form 26QC before 30th April, i.e. within 30 days from the end of the month in which TDS is deducted. Also,  Hannah should furnish the Form 16C to the landlord before 15th May, i.e. within 15 days from the due date of furnishing challan cum statement in Form 26QC.

What if I fail to furnish Form 16C?

If you fail to issue TDS certificate in Form 16C to the landlord within 15 days of furnishing Form 26QC you would have to pay a penalty of INR100 for each day of delay.

How To Download Form 16C? 

• Click here to register as taxpayer on TRACES with details of PAN and either detail of tax deducted or details of challan or details of Form 26QC. Also, enter the verification code and click on ‘Proceed’. Activation link will be sent to email id through which account can be successfully created
• If already registered login to TRACES here enter PAN as User Id, Password, PAN, and captcha. 
• Furnish details such as assessment year, acknowledgment no. of the Form 26QC and PAN of the seller
• Form 16C will now be available on requested downloads section under Downloads category
• Form 16C can now be printed/saved

Click here to view the format of Form 16C.

Penalty For Not Deducting TDS

Under Section 194-IB, every tenant who is an Individual or HUF paying rent exceeding Rs. 50,000 per month will have to deduct the TDS. Non-deduction of TDS and filing Form 26QC, then Tenant is liable for interest of 1% per month or part of a month for delay in deducting,1.5% per month or part of a month to the date on which TDS was deposited for delay in depositing tax and also a penalty for late filing the TDS return @ 200 per day.

Difference Between 194I & 194IB