Know About Form 16C and Challan 26QC for deducting TDS on Rent

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 ambit of tax, 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 till 31st March 2017, only those individual/HUF have to deduct TDS @ 10% if tax audit (u/s 44AB) is applicable to them. So, in this case, the individual/HUF not covered under 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 @ 5% if the payment of rent is Rs 50,000 or above. For the 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.

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 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 authorized 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 @ 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.

For instance:

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.

File your returns in just 3 minutes

100% pre-fill. No manual data entry

File Now