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According to Section 194IB, it is mandatory for any person, i.e. individuals/HUF not liable to audit u/s 44AB, to deduct taxes for a rent paid to a resident, exceeding Rs 50,000 per month.
According to the section, rent means a payment made by a payee under a tenancy, lease, sub-lease, or any other arrangement made for assets such as:
The payee may or may not own the assets mentioned above.
TDS must be deducted, by the individuals or HUFs, earlier of:
Tax rate applicable is 5%, in case the rent payment exceeds Rs 50,000 and the landlord’s PAN is provided. Otherwise, if the PAN is not available, then TDS of 20% will be applicable.
A person who pays rent to the landlord under a Joint Development Agreement (JDA) must deduct TDS under the Section 194IC.
A Joint Development Agreement is an agreement of the owner of an asset (such as land or building or both) to allow a person to build a real estate project in that asset. In return, the owner receives a share and/or cash payment.
The deduction will be made either at the time of income credit to the account of the payee or at the time of actual payment, whichever is earlier. The payment can be made in cash, cheque, draft, or other methods.
a. If the amount is credited or paid in March - on or before April 30.
b. In any other case - on or before seven days from the end of the month in which the deduction is made.
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 a proof for the tax deposited. A tax deduction account number (TAN) is not necessary to make the transaction.
In case of non-deduction of taxes, the tenant may have to pay a penalty that is equivalent to the amount of taxes deducted. On the other hand, 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 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.
Click here to know more about the deposit of TDS and quarterly returns of TDS and penal implications for TDS defaults.
Step 1: Open the URL, https://www.tin-nsdl.com/.
Step 2: Choose the option ‘TDS on Rent of Property’. A new window appears. Click on ‘Online form for furnishing TDS on property (Form 26QC)’.
Step 3: A page with the headline ‘e-Payment of Taxes’ will appear. Fill in the necessary details such as property details, tax deposit details, the amount paid, date of tax deduction, and landlord and tenant details.
Step 4: You can either pay the tax online immediately or visit an authorised bank for the same.
Step 5: Note the acknowledgement number of the payment for future references.
You can download the Form 26QC and print it for documentation purposes. Also, do not forget to provide Form 16C to the landlord as a proof for tax payment. The landlord may use it while filing his taxes.