Section 194-IB has been introduced in Chapter XVII-B of the Income Tax Act, 1961 by the Finance Act, 2017.
Section 194-IB of the Income Tax Act
As per this section, with effect from 1st June, 2017; any person, being an individual or HUF (other than those referred to in section 194-IA); responsible for paying any income to a resident, by way of rent exceeding Rs 50000 for a month or a part of month during the PY; shall deduct TDS at 5% on such income. In case of rent, the receiver is not holding PAN, TDS would at 20%. Only the payments of rent paid/payable after 1st June 2017 are covered under this section.
This section applies to an individual or HUF, who are not required to have tax audit as per Income Tax Act. The provisions of section 203A won’t apply to a person required to deduct tax under the provisions of this section. In case if the tax deduction is required as per the provisions of section 206AA; such deduction shall not surpass the amount of rent payable for the last month of the PY or the last month of the tenancy; as the case may be.
The person must deduct tax on such income at the time of credit of rent, for the last month of the PY or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
As per this section, ‘Rent’ means any payment, by whatever name called, under any tenancy, lease, sub-lease, or any other arrangement or agreement for the use of any land or building or both.
Time limit to deposit TDS
For government assessee:
- Same day if tax is to be deposited without challan
- Within 1 week from the end of next month, in which tax is paid; if tax is to be deposited with challan
For non-government assessee:
- 30th April, if the tax is paid in the month of March
- Within 1 week from the end of next month, in which tax is paid; if the tax is paid in months other than the month of March
Every person responsible for deduction of TDS under this section shall furnish the certificate of deduction of TDS in Form 16C to the payee; within 15 days from the due date for furnishing the challan-cum-statement in Form 26QC.
The tax deductor does not need to apply for TAN to deduct TDS U/S 194IB. However, the PAN of the lessor/landlord and lessee/tenant may be required to be quoted in the challan so that lessor can take credit of tax deducted and remitted.
In case the payee fails to furnish PAN or submit inaccurate PAN; the tax will be deducted under the provisions of section 206AA.