Reminder: TDS on Rent payable by Individual and HUF

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Provisions of section 194-I, inter alia, provide for deduction of tax at source at the time of credit or payment of rent to the account of the payee beyond a threshold limit. It is further provide that an Individual or a Hindu undivided family who is liable for tax audit under section 44AB for the financial year immediately preceding the financial year in which such income by way of rent is credited or paid shall be required to deduction of tax at source under this section. Therefore, under the provisions of sec. 194-I, an Individual and HUF, being a payer (other than those liable for tax audit) are out of the scope of section 194-I of the Act.

In order to widen the scope of tax deduction at source, section 194-IB has been inserted which provides that Individuals or a HUF (other than those covered under 44AB of the Act), responsible for paying to a resident any income by way of rent exceeding ₹ 50,000 for a month or part of month during the previous year, shall deduct an amount equal to 5% of such income as income-tax thereon. The provision of section 194-IB is enumerated here-in-below:

Who is responsible to deduct tax: Any person, being an individual or a Hindu undivided family (other than those referred to in sec. 194-I), responsible for paying to a resident any rent.

Rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both

When tax shall be deducted: At the time of credit of rent for the last month of the previous year (or the last month of tenancy, if the property is vacated during the year) 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

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Rate of TDS: 5%

When TDS cannot be made: Where rent for a month or part thereof does not exceed ₹ 50,000/-

Other Points:

  • The deductor shall be liable to deduct tax only once in a previous year
  • The deductor is not required to obtain Tax Deduction Account Number as required u/s 203A.
  • As per provision of sec. 206AA, if payee fails to provide his PAN, TDS is required to be deducted @ 20%. However, deduction under this section shall not exceed the amount of rent payable for the last month of the previous year (or the last month of the tenancy).
  • The deductor is required to pay TDS online using the Form 26QC.
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