Apr 106 min read

Form 26QC: TDS on Rent under Section 194-IB

Updated: Aug 1

The government, in the 2017 Budget, introduced Section 194IB to be sure that high rental income is brought to the tax fold. This section requires any individual or HUF whose books of account are not subject to tax audit under Section 44AB to deduct a 5% TDS with regard to rent paid if the payment exceeds Rs 50,000 per month; this came into effect on June 1, 2017. Earlier to this, it was mandatory deduction at 10% only in cases under tax audit was required by the payee until 31st March 2017.

Post-introduction of Section 194IB, every person other than an individual or HUF who is making payment of rent exceeding Rs 50,000 is required to deduct TDS at the rate of 5%. However, for the financial year 2020-2021, to ease the problems of financial crunch affected by COVID-19, the rate was temporarily reduced to 3.75% for rent payments made from May 14, 2020, to March 31, 2021. This act is considered as a major relief during the time of the pandemic.

However, an individual or HUF is also under an obligation of TDS deduction at the rate of 5% if rent is paid above Rs 50,000. Rent payments made by an individual or HUF under section 194IB are under a reduced TDS rate of 3.75% for payments made between May 14, 2020 and March 31, 2021, for the financial year 2020-2021.

What is Form 26QC?

Form 26QC is one of the most important forms for tenants who deduct TDS. For every resident landlord to whom rent is paid, a tenant shall furnish this form. Specifically, this form is required to furnish a quarterly statement according to provisions laid down under the section 200(3) of the Income Tax Act. This form should be filled with great care, since any mistake on this form may bring to light substantial penalties for not discharging the taxes due from the rental payments on properties.

Key Features of Form 26QC:

Purpose: Form 26QC enables the tenant to enter his particulars to report TDS on rent paid to a resident landlord, which needs to be paid. The rate of TDS on payment of rent is 5%.
Due date of filing: It will be mandatory for a tenant to file Form 26QC within 30 days from the end of the financial year or from the time the property has been vacated or the rental agreement has been terminated, whichever is earlier.
Due date to pay TDS: The tax deducted on rent shall be paid within 30 days from the end of the month in which the deduction was made.

Form 26QC does not consist of multiple annexures, unlike some other TDS forms like Form 24Q. It gives a consolidated report of those transactions which stand in reference to the payment of TDS on rent. Here are the key elements typically included in or alongside Form 26QC:

Details of Transaction: This section captures comprehensive information about the rent transaction, including:
Tenant and Landlord Information: Name, address, PAN details of the tenant, and the landlord.
Property Details: Address and description of the property on rent.
Details of Transaction: Amount of the rent paid, the period of tenancy, the date of deduction of TDS.
Challan Details: Details about TDS payment submitted to the government
BSR Code: Employees should provide a correct BSR code of the bank branch in which that specific amount is paid for tax.
Serial Number of the Challan: The number allotted to the specific challan in which the tax is deposited.
Date of the Deposit: The date on which the TDS is deposited to the government.
Declaration and Verification: A part in which the tenant is bound to declare that the above particulars are said correctly and verified. To be signed and dated by the tenant.

Who needs to File Form 26QC?

Form 26QC must be filed by the property's renter, who is responsible for paying the resident landlord's rent. Tenant payments for rent are subject to a five percent TDS deduction.

When to File Form 26QC?

The deadline for paying TDS on rent is 30 days after the end of the month in which the deduction is made. On the other hand, the tenant has 30 days from the end of the fiscal year, the day the property is vacated, or the termination of the rent agreement to complete Form 26QC.

Form 26QC Online Payment

The steps to submit Form 26QC online are as follows:

Step 1: Clicking the link will take you to the TIN website. You would have to choose TDS on the rent of property under the services category in the portal's menu bar.

Step 2: After choosing TDS on the property rent, proceed to the bottom of the page and select the online form to provide TDS on the property.

Step 3: Select TDS on the rent of property under the e-payment of taxes, and then click continue.

Step 4: Fill out Form 26QC accurately. This form consists of four components that you must read through and complete.

Details for Filing Form 26QS

The following are the required details for filling out Form 26QS:

Tenant PAN and Name
Landlord PAN and Name
Address of Tenant and Landlord
Address of Rented property
Type of Asset (Building, land, or both)
Tenant’s and Landlord’s Mobile No and email ID of
Tenancy period (No of Months)
Total Rent payable
Rent paid in last month
Date of Payment and tax Deduction
Bank Payment Details

Penalty for Delay/Non-Filing of Form 26QS

For every month that the tax isn't deducted, you have to pay 1% interest. If the tax has been withheld but not deposited, the penalty is greater and lasts for one month at 1.5%.
The tenant would be subject to a penalty ranging from Rs. 10,000 to Rs. 1,00,000 if Form 26QC was not filed within a year of the due date.
There is a 200 rupee late fine for each day if Form 26QC is not filed on time. The penalty for failing to issue Form 16C on time is one hundred rupees per day.

Conclusion

An essential part of India's tax system is Form 26QC. It guarantees that rental income is fairly taxed. To stay out of trouble and meet deadlines, tenants need to be aware of their duties. The process is now easier to access and more effective thanks to online filing choices.

FAQ

Q1. What is the purpose of Form 26QC?

The transactions subject to TDS on rent under section 194-IB are reported in Form 26QC, a challan cum return statement that must be filed each month after the payment.

Q2. How much penalty will you have to pay for late filing of Form 26QC?

Penalties for late filing might include interest, late fees, and hefty fines. The amount of TDS involved and the length of the delay determines the precise penalty.

Q3. Can the landlord file Form 26QC instead of the tenant?

No, since the tenant is the one paying the rent, Form 26QC is their duty. The tenant is required to use this form to deduct and file TDS.

Q4. What is Form 16C?

Anybody who has deducted TDS from rent under section 194-IB is required to give a TDS certificate in Form 16C to the deductee or landlord. The landlord or deductee must receive Form 16C from the bank within 15 days of filing Form 26QC or sending the TDS payment to an approved bank.

Q5. How do I obtain Form 16C, and what is its importance?

A TDS certificate, Form 16C, is given to the landlord (deductee) by the tenant (deductor). It is necessary for the deductee's tax compliance and gives information on the TDS withheld from rent payments.

Q6. What if the tenant does not deduct TDS on rent?

The tenant may be subject to fines and interest if they neglect to deduct TDS. Furthermore, they still have to give the government the TDS amount.

Q7. Can I rectify Form 26QC after filing?

Yes, you can file a correction statement to fix any inaccuracies found in the form after it has been filed. To avoid further penalties, though, you must take quick action.

Q8. What is the TDS limit for rent under Section 194-I?

Renters are required by Section 194-I of the Income-tax Act to deduct ten percent TDS from any building or land. If the annual rent paid exceeds Rs 2,40,000, TDS is charged.

Q9. Is Form 26QC monthly or yearly?

Every month after the payment date, Form 26QC, a challan cum return statement, must be completed to report the transactions subject to TDS on rent under Section 194-IB.