SE CTION 194IB- TDS ON RENT OF IMMOVABLE PROPERTY

TDS U/S 194IB: TDS ON RENT OF IMMOVABLE PROPERTY

1. What do you mean by TDS?

TDS stands for Tax Deducted at Source. TDS is a kind of tax that is deducted by the payer before making certain payments like Salary, Rent, Commission, Interest, Royalty, Professional Fees etc. to the payee.

TDS is required to be deducted at the source if the money to be paid and the money already paid exceeds a specified amount.

The Payee can claim this tax deducted by the payer while paying his income tax liability for the year, and if the TDS deducted is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TDS was to reduce the Tax evasion by the person receiving the income.

Note: -

Payer- A payer is a person or organization who is responsible for deducting TDS before paying the amount to Payee.

Payee- A Payee is a person or organization who receives the payment from the payee after the TDS deduction.

2.  What is TDS under Section 194IB of Income Tax Act?

Section 194IB of Income Tax Act, 1961 mandates that TDS to be deducted by the payer while making payments related to rent of immovable property to the payee.

3. When is TDS to be deducted under Section 194IB?

TDS is required to be deducted: -

• At the time of actual payment of last month.

            Or

• At the time of crediting the account of payee, whichever is earlier.

Few examples of date of deduction are: -

4. Who is required to deducts TDS under Section 194IB?

TDS is to be deducted by the Individual/ HUF (not covered u/s 194I) while making payments related to rent of immovable property to the payee (resident payee only).

NOTE: -

This section i.e. TDS on payments related to rent of immovable property is not applicable in case of non-resident payee.

Example: -

Q. Mr. Kunal a salaried individual pays rent of building Rs. 55,000 per month to Mr. Yogi from June 2024. Is he required to deduct TDS? Also, compute the amount of tax to deducted at source?

Would your answer change if Mr. Kunal vacated the premises on 31^st December 2024?

     Since Mr. Kunal pays rent exceeding Rs. 50,000 per month in the F.Y 2023-24, he is liable to deduct at a rate of 2%.

     Thus Rs. 11,000 (Rs.55,000*2%*10) is to be deducted from rent payable for March.

If Mr. Kunal vacated the premises in December, then tax of Rs. 7,700 to be deducted from rent payable for December 2024.

In case Mr. Yogi does not submit his PAN, then TDS will be deducted @20% subject to last month’s rent.

In our case if property is taken on rent during the whole year, then TDS would amount to Rs. 1,10,000 (55000*10*20%) but the same to be restricted to Rs. 55,000

5. Rate of TDS under Section 194IB?

The TDS rate under this Section is: -

NOTE:

In case the PAN & AADHAR of the seller is not linked then the TDS rate will be 20% instead of 1%.

Following October 1^st, 2024, the TDS rate will be reduced from 5% to 2%.

6. Exemption under Section 194IB?

No TDS if: -

• Rent is up to Rs. 50,000 per month or part of the month.

7. Time limit for deposit of TDS under Section 194IB?

The due date for deposit of TDS is as below: -

8. What is the due date for filing of TDS return under Section 194IB?

TDS return must be filed only once at the end of each financial year.

9. Type of TDS return & form to be issued?

TDS under this section has to filed at year end through FORM 26QC and the deductor has to issue FORM 16C to the employee after filing of return within 15 days of filing return.

10. Fees/ Penalties for Late/ Non- Filing of TDS u/s 194IB?

Following penalties/fees will be levied if there is delay in TDS deduction or delay in deposit of TDS or non-filing of quarterly return.

11. FREQUENTLY ASKED QUESTIONS?

Q. What is the threshold limit for TDS under 194IB?

A. The threshold limit for TDS under 194IB is Rs. 50,000 per month or part of month.

Q. Is 194IB applicable when paying rent to non-resident?

A. No, this section is not applicable when paying rent to non- resident person.

Q. Is it mandatory to obtain tax deduction account number (TAN) to deduct TDS under Section 194IB?

A. No, TAN is not required to deduct TDS under Section 194IB as PAN is used for filing of 26QC statement.

Q. What is the benefit of reduction of TDS to 2%?

A. The landlord will receive higher payout and will be able to use money throughout the year rather than waiting for a refund.