- Last Date to File ITR for FY 2022-23 (AY 2023-24) - Income Tax Return Due Date
- Income Tax Return (ITR) Filing FY 2022-23 (AY 2023-24): How to File ITR Online India
- Documents Required for Income Tax Return (ITR) Filing in India FY 2022-23 (AY 2023-24)
- How to Calculate Income From House Property
- 80G Deduction: Claim Tax Benefits on Donations to Charitable Institutions
Form 16C and Challan 26QC: TDS on rent
Section 192 to Section 194 of the Income Tax Act deals with TDS deductions. These sections state that the payer must deduct TDS from the amount of money paid to the payee. Different types of payments attract different rates of TDS. When a TDS is deducted, the deductor provides the deductee with the details of TDS deductions in a specified form. For instance, Form 16 contains the details of TDS deducted from an employee's salary.
Similarly, Form 16C is a TDS Certificate issued by a Tenant to a Landlord for payment of Rent under Sec 194IB.
What is Form 16C?
Section 194IB of the Income Tax Act deals with TDS deductions on rent. It states that individuals and Hindu Undivided Families (HUFs) who pay rent exceeding INR 50,000 for a month or part of a month during the previous year should pay the rent after deducting TDS on it @5% (This section is effective from 01.06.2017). When TDS is deducted from rent, the details of the TDS deducted are provided in Form 16C. Thus, Form 16C is a TDS certificate showing TDS rent deductions.
Section 194IB was introduced by the Indian Government in the Union Budget 2017. The section became operational on 1st June 2017. Before the section was introduced, until the financial year ending 31st March 2017, TDS was deducted @10% if tax audit applied to the assessees under Section 44AB. If the individual or HUF was not subjected to a tax audit, a TDS deduction on rent was not applicable. However, with the introduction of Section 194IB, TDS was made mandatory if the rent exceeded INR 50,000, whether there was a relevance of tax audit or not.
Deduction of TDS under Section 194IB
As per the provisions of Section 194IB, the following would apply –
- Individuals and HUFs will deduct TDS if they pay a monthly rent exceeding INR 50,000.
- TDS would be deducted @ 5%
- TDS would be deducted only once during one financial year
TDS would be deducted in any one of the following instances, whichever is earlier –
- The credit of rent to the landlord’s account in the last month of the financial year
- Payment of rent in the last month of the tenancy if the house is vacated during the financial year
- Payment of the rent to the landlord
Suppose an individual living in a 3BHK penthouse for which he is payable a rent of INR 75,000 monthly. Since the rent is more than INR 50,000, the individual would have to deduct TDS @5% before paying the rent to the landlord on the whole amount at the time of credit of rent to the landlord’s account in the last month of the financial year, or payment of rent in the last month of the tenancy if the house is vacated during the financial year or payment of the rent to the landlord.The total TDS amount will be INR 45,000 (INR 9,00,000*5%).
When is TDS deducted?
TDS is deducted once in a financial year. This could be any time either at the time of credit of the rent to the account of the (landlord) for the last month of the financial year or the last month of the tenancy if the property is vacated during the year or at the time of payment.
Payment of TDS to the Government
After the TDS has been deducted by the individual or the HUF, the same should be deposited with the Government. The deposit should be made within 30 days from the last date of the month in which TDS was deducted. So, in the above example, if TDS is deducted on 15th April, 2019, the same should be deposited to the Government by 30th May, 2019.
When depositing TDS with the Government, Form 26QC must also be filled and submitted. Form 26QC is a challan-cum-statement of the TDS deduction done on rent.
The TDS can be deposited with the Government using the electronic mode of payment through the RBI, SBI, or any other bank authorized to collect TDS on behalf of the Government.
Due date to file Form 16C
After the TDS is deducted and deposited with the Government, the deductor is required to prepare and provide the landlord with Form 16C. As stated earlier, Form 16C would contain the details of TDS deducted. This form should be furnished to the landlord within 15 days of submitting Form 26QC. If Form 16C is not furnished within the specified time frame, the deductor would have to pay a penalty for delay. The penalty amount would be INR 100/day of delay.
Format of Form 16C
The form contains the following details –
- Certificate number
- The date on which the form was last updated
- Name and address of the tenant who is the deductor of TDS
- Name and address of the landlord who is the deductee
- PAN Card numbers of the deductor and the deductee
- Financial year for which TDS has been deducted
- A summary of TDS transactions which would contain the Unique Acknowledgement Number, amount of rent paid, date of payment of rent and the amount deducted as TDS.
- Details of deposition of TDS to the Government, which would contain the amount of TDS deposited, the date on which the deposit was made and the bank branch code and challan serial no.
- Lastly, there is a verification that is filled and signed by the deductor stating that the TDS has been deducted as per the tax norms. The deductor should then furnish the date, place, full name, and his signature.
How to Download Form 16C?
Form 16C can be downloaded via the official portal. To download the form, the following steps can be taken –
- Visit the e-portal
- Log into your account with your user ID and password. A verification code will also be required to be provided
- Once the login is complete, you will be taken to the landing page
- On the landing page, under the ‘Downloads’ tab, you will find the option of downloading Form 16B/C
- Select ‘Form Type’ and then select the ‘Assessment Year’ for which you need the form
- Then you would have to enter the acknowledgment number and PAN card number of the landlord
- When you select ‘Proceed’, you would be able to see a list of challans which you can download
- You can select Form 16C and download it
- The form would contain the relevant details like name of the deductor, the deductor’s father’s name, etc. Fill in the details and click ‘Submit a request’
- Your request for Form 16C would be submitted
- Once the request becomes ‘available,’ you would be able to download the form.
So, if you are paying a monthly rent exceeding INR 50,000, understand the provisions of Section 194IB. You should pay the rent after deducting TDS on it @5%. You would also have to prepare and furnish Form 16C, which would show the details of the TDS which you have deducted. If you don’t comply with the provisions of the Income Tax Act, you would face penalties. So, know about Section 194IB and Form 16C so that you can avoid penalties.
Frequently Asked Questions
Q- 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.
Q- 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.
Q- How can I get Form 16C?
Form 16C can be downloaded from TRACES website of the Government by the tenant who is paying rent. The form could be downloaded only if you have processed Form 26QC and deposited the TDS to the Government.
Q- What if I fail to furnish Form 16C?
If you fail to submit Form 16C to the landlord within 15 days of furnishing Form 26QC you would have to pay a penalty of INR100 for each day that you delay in providing the form.
Q- 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.