What is Section 194-IB?

If an individual or a HUF is responsible for paying to a resident any income by way of rent exceeding Rs. 50,000 for a month or part of a month during the previous year, shall deduct an amount equal to 5% of such income as income-tax thereon.
In simple words, this section says that, an individual or HUF who is not liable for audit u/s 44AB, will have to deduct TDS. Such TDS will have to be deducted when they are paying income of rent to any resident in the year. But there is an exemption limit given. TDS on rent will be deducted only when rent paid exceeds Rs 50,000 per month. The deductor is not required to have TAN for deducting TDS under this section.

When to deduct TDS?

TDS needs to be deducted, earlier of:
Credit / Payment of rent for last month of the year or last month of tenancy if property is left during the year.At the time of payment by cash, cheque or any other way.
Rate of Tax
Regular rate5%
If PAN not available20% but TDS cannot exceed rent amount of last month of P.Y or tenancy.

How it is different from Section 194-I?

Information presented in pictorial form is always appreciated. That’s why; we have made a simple & easy to understand info-graphic for you. Have a look at it below to understand difference between 194-I & 194-IB.

TDs on Rent

Form 26QC

A Form 26QC is a challan cum statement. If you have deducted any tax u/s 194-IB, then you are required to deposit such tax through this form. The TDS deducted needs to be deposited within 30 days and should accompany Form 26QC.
Now, Form 26QC is generally required to be submitted once, at the end of FY. But there can be some scenarios in which it needs to submit early. These are:

  • If you are vacating property before year the end then it is to be submitted in the month when the premise is vacated.
  • In case your agreement period contains more than one FY, then you have to submit this form more than once i.e. at the end of each Financial Year.

Let us understand it even better through an example.
Case I: You have entered into a rent agreement for 11 months from 1/10/17 to 31/8/18. Rent amount is Rs 70,000 p.m. Here, Form 26QC will have to be filed twice as shown below.
agreement for 11 months
Case II: You have entered in a rent agreement for a period of 6 months from 1/7/2017 to 31/12/2017. Rent amount is Rs 70,000 p.m. Here, Form 26QC will be filed only once.
agreement for 6 months

Now after going through the example, you must be wondering what is Form 16C?

Form 16C

Just like 194-IB made its debut this year, alongside Form 16C also came into existence. A Form 16C is simply a TDS certificate similar to Form 16 & 16A. This certificate is issued to the payee when TDS u/s 194-IB is deducted. It acts as a proof for payee that TDS has been deposited on his behalf to the government. It is important to note that; person who is deducting TDS needs to issue this form within 15 days from date of filing of challan (Form 26QC).

What if you do not comply with provisions?

Like we’ve told you many times before, Income tax babus do not like when people don’t listen to them. There several existing and newly inserted penalties against non-compliance. These are as follows:

General Provisions:
? If you don’t deduct TDS, then you may be liable to pay penalty.
? Penalty interest @ 1% p.m. can be levied on you, if tax is not deducted. Period of interest will start from date tax needs to be deducted till it is deducted.
? Penalty interest @ 1.5% p.m. can be levied on you, if tax is deducted but not paid to government on time. Period of interest will start from date tax is deducted till it is actually paid.
Specific Provisions:
? If you get delayed in filing of Form 26QC, then a penalty of Rs 200 per day may be levied. However, the amount of penalty cannot exceed amount of TDS.
? In case of late issuance of TDS certificate i.e. Form 16C, then a penalty of Rs 100 per day may be levied. Similarly, the amount of penalty cannot exceed amount of TDS.

The provisions of TDS are very vast and complicated to understand unless they are simplified. We hope that after reading our blog, Sec 194-IB is more familiar to you than before. To make it even more understandable, we included an info-graphic differentiating between 194-I & 194-IB. If you are anyhow falling under the provisions of Sec 194-IB, we request to comply with all the rules and save yourself from any kind of notices, penalty etc.
If you need any further assistance, then you can also get in touch with our eCAs.. You can also file your income tax return for free! Visit at Tax2Win and file today.. Keep following our blog and social media pages for regular updates.

Frequently Asked Questions

Q- What is the exemption limit for TDS on rent?

Ans: TDS shall not be deducted if rent amount is upto rupees 180000.

Q- Who is liable to deduct TDS on rent?

Ans: The person (other than individual and HUF) is liable to deduct TDS on rent under section 194I

Q- How can I file TDS for sale of property?

Ans: 1. Go to NSDL website
2. Under TDS on sale of property click on the online form for furnishing TDS on property.
3. Select the applicable challan TDS on sale of property.
4. Fill the complete form
5. Submit the filled form to proceeds then an acknowledge number is generated
6. On successful payment a challan is displayed on the screen containing CIN, payment details etc.

Q- Can individual deduct TDS on rent?

Ans: Individuals is liable to deduct TDS under section 194IB other than the individual whose audit is conducted under sec 44AB if the monthly rent is exceeds the 50000 rupees. TDS shall be deducted @5%.

CA Abhishek Soni
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.