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

By Shefali Mundra

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Updated on: Jul 1st, 2024

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4 min read

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 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.

Up until 31 March 2017, only individuals and HUFs had to deduct TDS at 10% if a tax audit (u/s 44AB) was applicable to them. So, in this case, individuals and HUFs not covered by a tax audit were excluded from deducting TDS irrespective of the amount of rent payment.

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. For FY 2020-21, rent payments under section 194IB by individual or HUF have a lower rate of TDS at 3.75% for payments from 14 May 2020 until 31 March 2021.

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.  

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: 

Vijay, who is a salaried employee, is paying a rent of Rs 60,000 per month. He deducted the TDS @5% for the whole year in the month of March. The amount of TDS comes out to be Rs 36,000 (5%*7,20,000). 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, Vijay 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.

For the FY 2020-21, due to COVID-19, the TDS rate under section 194IB is 3.75% for payments from 14 May 2020 until 31 March 2021. The TDS due for deposit in March under section 194IB consists of dues calculated at 5% until 14 May 2020 and at 3.75% for the rest of FY 2020-21. You can download form 16C or Form 26QC online from TRACES website.

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 with username as ‘PAN’ and password
  • Under downloads tab Select ‘Form 16C (For Tenant)’
  • 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% for delay in deducting,1.5% for delay in depositing tax and also a penalty for late filing @ 200 per day.

Difference Between 194I & 194IB

Particulars

194I

194IB

The person responsible for TDS deduction

(Individual and HUF) who are covered under Section 44AB (a) and (b) For other Assessee - no condition

(Individual and HUF) who are not covered under Section 44AB (a) and (b) For other Assessee - Section not applicable

Monetary Limit

Rs. 2,40,000/- per annum

Rs. 50,000/- per month

Assets

Land, Building, Plant and machinery, furniture and fitting

Land and building only

TDS Rate

2% plant and machinery, 10% Land, Building, furniture and fitting

5% on land and building subject to a maximum of last month's rent of the FY

Time Limit of TDS deduction

At the time of credit or payment, whichever is earlier

At the time of credit for the rent of last month or the last month of tenancy Or at the time of payment, whichever is earlier

Time Limit for payment of TDS

Within 7 days from the end of the month in which it was deducted. (For March month - 30th April instead of 7th April)

30 days from the end of the month in which TDS deducted

TAN required

Yes

No

Form to be filed

26Q

26QC

TDS Certificate

Form 16A

Form 16C

Frequently Asked Questions

If I pay a yearly rental of INR 3.6 lakhs, would I be required to deduct TDS?

A yearly rental of INR 3.6 lakhs amounts to a monthly rent of INR 30,000. Since the rent is below INR 50,000, you would not have to deduct TDS from the rent as Section 194IB would not be applicable to you.

What would be the rate of TDS if the landlord does not provide his PAN details?

The rate of TDS would be 5% if the landlord’s PAN details are available. However, if the landlord’s PAN details are not available, the rate would be 20%, subject to a maximum of the rent payable for the last month of the financial year.

Is TAN mandatory for deduction under 194IB and to file Form 26QC?

No, TAN is not mandatory to deduct TDS on rent and file Form 26QC. Only the PAN card number of the deductor and deductee would be required.

About the Author

As a creative finance content writer and a Chartered Accountant by profession, I am deeply passionate about educating the masses about finance and taxation. To date, I have authored numerous blog posts covering a diverse range of topics on finance, taxation, trading, and investment for esteemed financial platforms. Driven by the commitment to enhance financial literacy, my ultimate goal is to demystify complex financial concepts into relatable insights and support educational initiatives in India.. Read more

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