TDS on Rent Payable by Individual

TDS on Rent Payable by Individual

Introduction:

In most of the cases, an Individual is not required to deduct TDS on payments. We will discuss the cases where an Individual is required to deduct TDS while making payments. Individuals making payment of rent would be required to deduct TDS on rent at the applicable rates depending upon the situation as explained below:

I. TDS on rent paid by individuals who were liable for tax audit

A person making payment of rent to any resident would have to deduct income tax if the annual rent exceeds Rs 1,80,000 (this has been increased to Rs 2,40,000 for FY 19-20)

Tax would be deducted at source at 2% if rent is against plant and machinery and at 10% if it is against land and building/ furniture and fixtures etc.

Under this section, an individual or HUF, whose turnover or gross receipts is more than Rs. 1 crore, in immediately preceding financial year, will be required to deduct tax at source. In other words, Individual or HUF who’s accounts in the preceding financial year were to be audited under Section 44AB, are liable to deduct tax at source.

II. TDS on rent paid by Individuals who are not liable for tax audit

An Individual or HUF paying rent exceeding Rs. 50,000 for a month or part of the month, would have to deduct TDS at 5 %.

When to deduct tax?

An Individual should deduct TDS:

  • at the time of credit of rent, or
  • at the time of payment of rent

Whichever is earlier.

Do an Individual require TAN for tax deduction?

An Individual, not liable for tax audit do not require TAN for TDS. He can simply deduct the tax and deposit the same using form 26QC.

Form 26QC is a challan-cum-statement for reporting the transactions liable to pay TDS under section 194IB of the Income Tax Act, 1961. It is an online form available on the TIN website.

Further, the Individual deducting tax is also required to issue form 16C to the landlord. It is the TDS certificate to be issued by the deductor (tenant) to the deductee (landlord) in respect of the tax deducted and deposited

When to file 26QC

The taxpayer /tenant should furnish challan-cum-statement at the end of the financial year or in the month when the premise is vacated. However, the taxpayer has to mandatory fill the Form at the end of financial year.

Transaction of Joint Parties to be filled in Form 26QC:

If there are more that one tenant/landlord, then online challan-cum-statement is to be filed by each tenant for unique tenant-landlord combination for respective share.

What would be the implication if one does not comply?

Implication of non-deduction:

Interest @ 1% per month of such tax on the date on which such tax was deductible till the date on which such tax is deducted.

Implication of non-payment:

Interest @1.5% of such tax on the date on which such tax was deducted till the date on which such tax is actually paid.

Fees for late filing of TDS Return:

Under Section 234 E, a fee of Rs. 200 per day will be charged for late furnishing of statement from the due date of furnishing a TDS statement to date of furnishing a TDS Statement, maximum up to the amount of tax deductible.

For delay in issue of Form 16C:

The penalty for delay in payment of Form 16C is Rs. 100 per day.

 

A chart summarizing Section 194I and 194IB

 

 

Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.

(The author is a CA in practice at Delhi and can be contacted at: E-mail: abhinandansethia90@gmail.com, Mobile: +91-9811741451)

 

 

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