TDS On House Rent | Section 194-IB

Overview

For generating income from house property many landlords offer their house property on rent. In case rent on house property exceeds Rs 50,000 per month, then the tenant has to deduct the TDS at 5% on rent payable. This rate has been proposed to be reduced from 5% to 2% with effect from 1st October 2024.

Under Section 194IB, TDS is deductible and is deposited by the tenant who occupies the house property for the usage in exchange of monetary/rental payment to the owner (landlord). The prime objective of getting this TDS certificate for rent is to simplify the procedures of tax payments made to the government. In order to file the TDS return, CA professionals are rather recommended over a mere individual who will proceed with the whole process for filing the TDS return for housing rent. In this article, we will provide you with complete insights into how to proceed with the TDS rate on house rent.

What is TDS on House Rent?

TDS on house rent under Section 194-IB states that the tenant who gains the right to occupy the house in exchange of rental or lease payments, needs to deduct and deposit TDS with the central government. The term 'rent' is referred to by name within the criteria for any tenancy, lease, sublease, agreement, or arrangement that facilitates the utilization of land, buildings, machinery, equipment, or fitting.

Applicability of TDS on house rent under Section-194IB

The TDS on house rent is applicable when payer of rent is HUF or individual including salaried employees to a resident person. The amount of rent should exceed Rs. 50,000 per month.

Section 194-IB TDS on house rent is not applicable under the following:

• Monthly rent is less than or equal to Rs 50,000 per month.
• When rent is paid to Non-resident Indian (NRI), which is covered under Section 195.
• LLP or Company or partnership firm, which is covered under Section 194-I.
• Individuals and HUFs who are liable for tax audits, i.e., turnover is greater than 1 crore in case of business or gross receipts is greater than 50 lakhs in case of profession is covered under Section 194-I.
• TDS won't be applicable on security deposits that are already given to the landlord unless security deposits are included in the rent amount.

Threshold and TDS Rates under House Rent

Here are the TDS rates, which are categorized on the basis of the nature of the property for which the rent is paid:

The PAN number of the landlord is important for processing the TDS at the proposed rate. If PAN is not provided by the landlord, then TDS rate will increase to 20%.

When to Deduct and Deposit TDS

TDS on house property is required to be deducted at the time of credit or actual payment of the last month rent, whichever is earlier. In case, the tenant is vacating the property in the middle of the financial year, TDS is required to be deducted in the last month of tenancy.

After the sum is deducted u/s 194-IB, then the time limit for depositing the TDS using the challan cum return in Form 26QC is 30 days from the end of the month in which TDS was deducted.

Form 16C for TDS on House Rent

After filing the Form 26QC, the tenant must provide Form 16C, a TDS certificate, to the landlord as proof of the tax deposited.

Documents Required for TDS on House Rent

Here are the 4 documents that are required at the time of TDS return filing:

• Copy of the rent agreement
• PAN of the landlord
• Copy of the TDS Challan
• Proof of Deposit of TDS

TAN number is not required for the deductor or tenant while deducting and depositing the TDS on house rent.

Penalties and Fines under TDS on House Rent

Here are the penalties and fines under TDS on house rent:

• TDS is not deducted: If a deductor has not deducted the TDS from the payment of the rent, then it charges interest of @1% per month till the date TDS is deducted.
• TDS is deducted but not deposited: If a deductor has deducted the TDS from the rent but has not deposited the collected tax to the government, then it charges interest @1.5% from the date when TDS is deducted till the date of deposition.

Why choose Bizfoc for TDS?

At Bizfoc, we specialize in providing you the best accounting services in filing your TDS for the purchase of property. Here are the reasons why we are known for our services to our clients on filing TDS:

• Assist in suggesting the right documents for TDS filing.
• Providing valuable insights on sections of TDS computations.
• Prescribe forms as per the necessity.
• Helps in accurate computations for TDS computations and returns.
• Tailored advice and guidelines for TDS filing.

In general, we assist the client to solve their queries and doubts regarding the documentation, procedures, and fees for filling out the form. Other than making your filing successful, we help you make a better decision by covering every aspect of what you actually need to get your TDS.

Conclusion

TDS on house rent is a crucial tax implication, which is done under Section 194-IB. The TDS deduction is crucial for maintaining the tax regulations and standards under the Income Tax Act. Filing the TDS by an individual himself can be a cumbersome and tiring process. So, it is advisable to get the TDS filed with the help of CA professionals and experts to get ease in filing TDS.

Frequently Asked Questions