Form 16C is the TDS certificate which is issued by the Tenant of property to the Landowner of property in respect of TDS deducted on rent under Section 194-IB

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 a rent of INR 50,000 and above should pay the rent after deducting TDS on it @5%. When TDS is deducted from rent, the details of the TDS deducted are provided in Form 16C. Thus, Form 16C is a TDS certificate which shows TDS deductions on rent.


Section 194IB

Section 194IB was introduced by the Indian Government in the Union Budget of 2017. The section became operational from 1st June 2017. Before the section was introduced, until the financial year ending 31st March, 2017, TDS was deducted @10% if tax audit was applicable to the assessees under Section 44AB. If the individual or HUF was not subjected to a tax audit, 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 –

  • TDS would be deducted by individuals and HUFs if they are paying a monthly rent of INR 50,000 or above
  • 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 –
    1. Credit of rent to the landlord’s account in the last month of the financial year
    2. Payment of rent in the last month of tenancy if the house is vacated during the financial year
    3. Payment of the rent to the landlord

Example

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. Thus, every month, the rent paid would be INR 75,000 less the applicable TDS which is INR 3750. Thus, the rent payable would become INR 71,250 and the TDS would be deducted and deposited with the Government.


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 would also be required to 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 which is authorised 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, date on which deposit was made and the bank branch code.
  • Lastly, there is a verification which 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.

Downloading Form 16C

Form 16C is available on TRACES. To download the form, the following steps can be taken –

  • Visit the TRACES website
  • Log into your account with your user ID and password. A verification code would also be required to be provided
  • Once the login is complete, you would be taken to the landing page
  • On the landing page, under the ‘Downloads’ tab you would 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 acknowledgement 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 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 of INR 50,000 and above, 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.


CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.