All About TDS On Rent And How To Pay It

Those who buy properties valued over Rs 50 lakh have to deduct one per cent of the transaction value as tax. This money, known as tax deducted as source (TDS), has to be duly deposited with the government. A similar responsibility lies with tenants, too.

What type of tenant must deduct TDS from rent?

Under Section 194-IB of the Income Tax Act, 1961, tenants, who are neither individuals nor Hindu Undivided Family (HUF) and pay an annual rent exceeding Rs 2.40 lakh have to deduct 10 per cent of the annual rent as TDS. Do note here that earlier limit was Rs 1.80 lakh which was increased to Rs 2.40 lakh in the Interim Budget 2019-20.

Through a provision in Budget 2017, the government also made it mandatory for individuals and HUFs that are not covered under tax audit but ho pay a monthly rent exceeding Rs 50,000 to deduct five per cent TDS. Before this provision was made, only individuals and HUFs whose accounts are audited were under an obligation to deduct TDS.

In case your landlord has received a certificate from the assessing officer that no deductions must be made on his rental income, you will not have to take the trouble of deducting TDS. This happens in cases where the landlord applies to the assessing officer by filling Form 13 and the officials is convinced that full or part exemption is justifiable.

Period of deduction

TDS on rent may be deducted on monthly, quarterly or yearly basis, depending on the payment module. This means if the tenant pays the rent monthly, he has to deduct TDS every month.

Now, let us understand the three steps using which the tax must be paid.

Form filling

Log on to www.tin-NSDL.com.  

On the website, you will find the link to fill Form 26QC.

Click here to get the Form.

This page will ask you to fill certain personal information of you and your landlord and all the details of the financial transactions. You would basically be required to mention the PAN numbers, phone numbers, email IDs of you and your landlord, the rent amount and all details of the property. In case you are sharing the premises with another person, their details must also be furnished. Similarly, if your landlord co-owns the property with someone else ─ his wife for instance — their details must also be given in the form.

Payment making

Now comes the time to make the payment. Once you are done filling the form, an e-tax payment immediately page would appear.

Now, there are two ways in which you could make the payment. You could either make the payment through net banking or credit or debit cards by clicking on the e-tax payment immediately page or visit branches of authorised banks to make the payment.  

Check out the list of authorised banks here.

Certificate issuing

It is also the responsibility of the tenant to issue the landlord a certificate that the payment has been made within 15 days. That is to say, in case made the payment on March 30, you must issue form 16C to your landlord by April 15. Within three four days of making the payment, you will be able to access the Form 16C on www.tdscpc.gov.in.

Do note that:

• Typically, the TDS must be deducted in the last month of a financial i.e. March. In case you vacated your landlord property before that that month, tax would be deducted till date of your stay. To avoid penalty, the tax must be paid latest by April 30.

• In case you fail to meet that deadline, one per cent interest of the outstanding will be charged every month as penalty. In case the TDS has been deducted and is deposited with the government but you have failed to issue the certificate to the landlord, 1.5 per cent interest per month has to be paid as penalty.

• Delay in filling Form 26QC would invite a daily penalty of Rs 200. In case the form is not filed for a long period, the penalty may go up to Rs 1 lakh.

• Delay in issuing Form 16C would invite a daily penalty of Rs 100.

• In case there are multiple landlords, multiple Form 26QCs must be filled and submitted.