194IB - Time Bomb on Landlords and Tenants

Last updated: 19 August 2018

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Finance Act 2017 dropped a bomb on the normal rent paying individuals in the form of section 194IB where an Individual & HUF paying a monthly rent of Rs. 50000 or above has to deduct the TDS at the rate of 5% from the total rent payment during the year, as the 31st March is approaching very fast there is very less time frame remaining for the same.

This is affecting both tenants as well as the landlord as per the below table:

To handle the handle the same with ease following are the points to be taken care of:

Tax is required to be deducted by Individual and Hindu undivided, for other assessee this provision is not applicable.
Tax is required to be deducted at the rate of 5% or lower rate subject to the permission under section 197 of the Act.
Tax can be deducted (if rent payment exceeds Rs. 50,000/- monthly) on:
- Monthly basis
- In the last month of the previous year.
- At the time of vacating the property.
Tenant is not required to obtain the TAN number for tax deposit and return filing (Section 203A).
If Landlord does not have the PAN then the tax deduction cannot exceed the last month rent (Section 206AA).
Tax deducted has to be deposited with the government within 30 days from the end of the month on which tax is deducted.
Tenant shall use the challan in the form 26QC for depositing the TDS with the government.
Tenant shall issue the TDS certificate the landlord in the form 16C.
Form 26QC is the challan cum TDS return statement.
Interest and late filing fee shall be applicable as per the normal provisions of the Act.