top of page
.png)
Form 16C: TDS Certificate for Rent Paid by Individuals or HUFs
Are you paying a monthly house rent more than INR 50,000? Are you deducting Tax at Source (TDS) on the same? If you don’t know about the same, then, read this article to understand the TDS provisions on rental expenses. If your monthly house rent is more than INR 50,000, make sure to deduct TDS and deposit the same with the Government. Also, you must issue a TDS certificate within the specified time so as to allow your landlord to claim the TDS.
This article explains when to deduct TDS while making rental payments and how to deposit the same within a stipulated time period.
Form 16C
Form 16C is a Tax Deducted at Source (TDS) certificate issued by the deductor. It certifies that the TDS is correctly deducted and deposited with the Central Government in respect of rental payment made under Section 194IB. A tenant issues Form 16C to the landlord so that the landlord can claim TDS benefit while filing the Income Tax Return (ITR).
Section 194IB
According to Section 194IB, every individual or Hindu Undivided Family (HUF) whose turnover or gross receipts from business does not exceed INR 1 crore or from profession does not exceed INR 50 Lakh in the immediate preceding financial year, must deduct Tax at Source (TDS) from the payment made towards the rent of any land or building or both. The TDS shall be deducted at the rate of 5%, if the monthly rent payments exceed INR 50,000.
Rate of TDS Under Section 194IB
If the rent for a particular month or part of the month exceeds INR 50,000 during the financial year, the tax shall be deducted at the rate of 5%. This rate is not subject to any increment because of the Health and Education Cess (HEC) and Surcharge. If, however, the deductee fails to provide a valid PAN to the deductor, tax shall be deducted at a higher rate of 20%. However, in such a case, the TDS amount cannot be more than the rent payable for the last month of the year or the last month of the tenancy, as the case may be.
Rate of TDS Under Section 194IB
Section 194IB | Section 194I |
|---|---|
Section 194IB is applicable to resident individuals and HUFs not liable to tax audit. | Section 194I is applicable to resident individuals and HUFs liable for tax audit. |
The rate of TDS is 5% on rental of land or buildings under Section 194IB. | The rate of TDS under Section 194I is:
10% on rental of land or building or furniture or fittings
2% on rental of machinery or plant or equipment |
The monetary limit under this section is INR 50,000 per month. | The monetary limit under this section is INR 2,40,000 per financial year. |
TAN is not mandatorily required of the deductor. | TAN is mandatorily required under Section 194I. |
TDS certificate under Section 194IB is issued in Form 16C. | TDS certificate under Section 194I is issued in Form 16A. |
TDS return is filed using Form 26QC. | TDS return is filed using Form 26Q. |
Deduction of TDS under Section 194IB
TDS deduction will defer in each instances under Section 194IB:
-
If tenancy continues until the last month of the year: The TDS will be deducted at the time of payment or credit of rent to the payee’s account on the last month of the financial year, whichever is earlier.
-
If the property is vacated during the year: The TDS will be deducted at the time of payment or credit of rent to the payee’s account on the last month of tenancy, whichever is earlier.
Payment of TDS to the Government
TDS deducted under Section 194IB must be deposited with the Central Government using Form 26QC. Such deposition must be made within 30 days from the last day of the month of TDS deduction. For instance, if TDS is deducted on April 16, 2024, the same shall be deposited with the Central Government by May 30, 20204 using the challan-cum-statement, that is, Form 26QC.
Format of Form 16C
The general content of Form 16C includes the following:
-
TDS certificate number.
-
The date when the form was last updated.
-
Name and address of the tenant who deducts the TDS.
-
Name and address of the landlord as the deductee.
-
PAN or Aadhaar details of the deductor and the deductee.
-
The financial year for which the TDS is deducted.
-
Details of summary of transactions including: unique acknowledgement number, amount paid/credited, date of payment/credit, and the amount of TDS.
-
Details of depositing TDS with the Government including: the amount deposited, the date of deposits, branch code of the bank, and serial number of the challan.
-
Finally, the deductor should provide verification by acknowledging and signing the Form 16C. Moreover, along with the signature, the deductor should provide, date, location, and full name while providing the verification.
Due Date to File Form 16C
After deducting and depositing the TDS, the deductor must prepare and provide Form 16C to the landlord. Form 16C would offer the information about the deduction of TDS. It must be presented to the landlord within 15 days of submitting Form 26QC. If Form 16C is not submitted within the specified time frame, the deductor will be liable to penal consequences which is INR 100 per day.
How to Download Form 16C?
A tenant can download Form 16C from the CPC-TDS website at https://contents.tdscpc.gov.in. This website is different from the income tax e-filing portal. The following steps should be performed to download Form 16C:
-
Step 1: To download Form 16C, a tenant can register on the TDS portal using PAN. Once registered, log in to the CPC-TDS portal using the user ID, that is, PAN and password.
-
Step 2: After successful login, go to the ‘downloads’ tab and select Form 16C. A new webpage will open on the screen. Enter the following details: relevant assessment year, Form 26QC acknowledgement number, PAN of the landlord, and click on submit button.
-
Step 3: The webpage will display a list of challans. From the displayed list of challans, click on the ‘download’ option.
-
Step 4: The screen will display the information of an authorized person. Check and then click on the submit button.
-
Step 5: After submission, a request number will be generated for downloading Form 16C. Click on the ‘downloads’ tab in the top right corner of the screen, and then select the requested downloads option. The request made for Form 16C will be available to download.
Frequently Asked Questions
Q
What is the rate of TDS under Section 194IB?
A
TDS under Section 194IB will be deducted at rate of 5% on rental of land or buildings, when the rental payment exceeds INR 50,000 per month. Moreover, the landlord’s PAN should be available with the deductor.
Q
What is the rate of TDS under Section 194IB in case of unavailability of PAN of the landlord?
A
In case the PAN of the landlord is not available with the tenant or the landlord does not hold a valid PAN, TDS under Section 194IB will be deducted at the rate of 20%.
Q
When will the tenant deduct TDS on house rent?
A
The tenant shall deduct TDS at the time of making rental payments to the landlord and deposit the same within the due date.
Q
What is the due date to deposit TDS under Section 194IB?
A
Under Section 194IB, the TDS must be deposited with the Central Government within 30 days from the last day of the month in which the tax was deducted.
Q
Explain Form 26QC in short.
A
Form 26QC is the challan-cum-statement to report transactions on which TDS is deducted under Section 194IB of the Income Tax Act, 1961. The tax deducted on monthly rent payments can be deposited using Form 26QC with the Government.
Q
Who files Form 26QC?
A
Form 26QC is to be filed by the tenant. It is a challan-cum-statement through which the TDS on monthly rent is deposited with the Government. After successful filing of Form 26QC, the tenant can issue Form 16C to the landlord.
Q
Suppose an individual pays a house rent of INR 4,50,000 per annum to the landlord. Are TDS provisions applicable to him?
A
If an individual is paying a house rent of INR 4,50,000 per annum, the monthly rent would be INR 37,500 (INR 4,50,000/12 months). This does not exceed INR 50,000 per month, which is the maximum limit for applicability of Section 194IB. Hence, no TDS provision is applicable if an individual pays a house rent of INR 4,50,000 per annum to the landlord.
Q
To whom Section 194IB is applicable? Can a company deduct TDS under Section 194IB while making rental payments?
A
Section 194IB is applicable to individuals or Hindu Undivided Family (HUFs) only while making certain rental payments. The said section is not applicable to the company. Hence, a company is not required to deduct TDS under Section 194IB while making payments for rent.
Q
What is the consequence of failure to deduct TDS?
A
If the deductor fails to deduct TDS, interest will be leviable at the rate of 1% per month or part thereof until the tax is actually deducted. Such interest is calculated from the date on which tax was required to be deducted to the date of actual deduction of TDS.
Q
What is the consequence of failure to deposit TDS?
A
If the deductor after deducting the tax, fails to deposit the same with the Central Government, interest at the rate of 1.5% per month or part thereof will be levied till the TDS is deposited with the Government. Such interest is calculated from the date of deduction of tax till the date of deposition of such tax with the government.
Q
What is the consequence of failure to furnish TDS Statement?
A
If a person fails to provide the TDS statement, he shall be liable for fees of INR 200 per day during which the default continues under Section 234E. However, such fee shall not exceed the amount of TDS. Moreover, the person in default shall be liable for penalties of INR 10,000, which can be increased to INR 1,00,000, and INR 500 for each day of failure under Section 271H and 272A.
Q
What is the consequence of failure to issue a TDS Certificate?
A
If a person in charge of issuing a TDS Certificate in Form 16C fails to do so, a penalty of INR 500 will be imposed under Section 272A for each during which the default continues.
Prachi Jain
Chartered Accountant
Prachi Jain is a Chartered Accountant with a passion for simplifying finance and tax-related matters through her insightful and informative blogs. With a background in finance and a deep understanding of tax regulations, Prachi has established herself as a trusted source of financial wisdom. Prachi is committed to empowering her readers with the knowledge they need to make informed financial decisions. Her expertise and dedication shine through in every blog post, helping her audience navigate the intricacies of finance and taxes with confidence. Follow Prachi Jain's blog for practical insights and guidance on managing your finances effectively.
RECENT POST
bottom of page