Of course, we all wait eagerly for the budget every year. Most of the time it brings a big smile to our face or sometimes it takes our anxieties to the toughest level. Some new laws have been introduced in the last year budget. Section 194-IB is the example of such debutante. Earlier, there was only one section that has brought the rent under the umbrella of TDS and it was section 194-I. Now, the most wondering thing is why would section 194-IB brought in when section 194-I was already there. The simple answer is "To widen the tax base". Under section 194-I, only those individuals and Hindu Undivided Family have been covered who were liable to get their accounts audited u/s 44AB. Ultimately, this section left a huge portion of rent payers uncovered because of the fact, not everyone became liable for audit. Further, if you want to file TDS Return you can go throughout website Legal Raasta.
What is section 194-IB?
If an individual or a HUF is found to be responsible for paying to a resident any income by way of rent exceeding Rs. 50000 for a month or a part of a month during the previous year, shall deduct an amount equal to 5% of such income as income-tax. In other words, this section state that an individual or HUF who is not liable for audit u/s 44AB, TDS will be deducted. At the time of paying an income of rent to any resident, such TDS will have to be deducted in that year. But there is also a relaxation in the form of exemption limit. TDS on rent will only be deducted when rent paid is more than Rs. 50000 per month. Even the deductor is not required to have TAN for deducting TDS as per this section.
When does TDSzdeduct?
TDS requires to be deducted, earlier of-
Payment of rent for the last month of the year or last month of tenancy, if a property is left during the year.
| At the time of payment by cash, cheque or any other way. |
Tax Rate
Regular Rate | 5% |
When PAN not available | 20% but TDS cannot exceed rent amount of last month of P.Y or tenancy. |
How does it differ from Section 194-I?
Following are the table that portrays the basic difference between these two sections:
Basis | Section 194-I | Section 194-IB |
Meaning | This is for all the businesses that are liable to get their accounts audited under section 44AB. | This is for all the individual and HUF that are not required to get their accounts audited under section 44AB. |
TDS Rate | 2% or 10% | 5% |
No TDS | up to Rs 180000 p.m | up to Rs. 50000 p.m |
Deduction | Monthly | Last month of the previous year or last month of tenancy |
TAN required | Yes | No |
Form issued | 16A | 16C |
Form 26QC
It is a challan-cum statement. If any tax is deducted under section 194-IB, then it is required to deposit such tax through this form. The deducted TDS needs to be deposited within 30 days and should accompany form 26QC.
Now, Form 26QC is usually required to submit once i.e end of the Financial year. But there are some scenarios in which it needs to submit early and these are given below:
- When you are going to vacate a property before the year end then it is to be submitted in the month of a vacated premise.
- When your agreement period contains more than one financial year then this form has to be submitted more than once i.e at the end of each Financial year.
Form 16C
No doubt 194-IB has made a debut that year but alongside Form 16C also came into existence. The Form 16C is a TDS Certificate similar to that of form 16 & 16A. This certificate basically issued to the payee in a case when TDS u/s 194 is being deducted. It is considered as a proof for a payee that TDS has been deposited on his behalf to the government. One thing must be noted that a person who is deducting TDS requires to issue this form within 15 days from the date of filing of challan (Form 26QC)
What if you do not comply with provisions?
As we told you before, Income tax babus do not like when the people go against them. There are several penalties which can be inserted for Non-Compliance. These are given below:
General Provisions
- If you avoid deduction of TDS then you may be liable to pay penalty.
- The penalty interest @1% p.m can be levied on you in case non-deduction. Interest period will start from date tax needs to be deducted till it is deducted.
- An interest of Penalty @ 1.5% p.m can be levied on you, in case if a tax is deducted but not paid to a government on time. Interest Period will start from the date tax is deducted until it is actually paid.
Specific Provisions
- If a delay in filing Form 26QC then in this case, a penalty of Rs.200 per day may be levied. Besides, the amount of penalty cannot exceed an amount of TDS.
- If the late issuance of TDS Certificate i.e Form 16C happens then a penalty of Rs. 100 per day may be levied. As above, the amount of penalty cannot exceed an amount of TDS.
This article has been contributed by Sarubpreet Kaur who is a content writer with LegalRaasta. Legal Raasta is an online portal.
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