House Rent Allowance (HRA): Paying over Rs 50,000 pm? Income Tax Dept says deposit TDS to avoid penalty

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Published: December 22, 2017 4:20:52 PM

Are you an individual or HUF paying a monthly rent of more than Rs 50,000? If yes, then deduct and deposit TDS @5% under Section 194-IB of the I-T Act 1961.

TDS on rent, Paying rent of more than Rs 50,000 pm, deduct TDS 5%, Section 194-IB of the Income Tax Act 1961, Form No 26QC, CBDTAfter deducting TDS, you are required to upload details of the tax deducted along with the correct PAN of the landlord in Form No. 26QC on the TIN website.

Are you an individual or Hindu Undivided Family (HUF) paying a monthly rent of more than Rs 50,000 to a person who is an Indian resident? If yes, then you are requited to deduct and deposit TDS (Tax Deducted at Source) @5% under Section 194-IB of the Income Tax Act 1961 at the time of credit of rent, for the last month of the financial year or in the month in which the premises is vacated or the agreement is terminated, CBDT has tweeted today.

You should do this within the time lines and in the form prescribed under the new rules to avoid any adverse consequences by way of additional fees, interest, penalty or prosecution.

According to CBDT, after deducting TDS, you are required to upload details of the tax deducted along with the correct PAN of the landlord in Form No. 26QC on the TIN website (www.tin.nsdl.com). (The tenant is not required to obtain TAN.) Then download and issue the TDS certificate to the landlord in the Form No. 16C from the TRACES website (www.tdscpc.gov.in) within 15 days of uploading the Form No. 26QC. However, this new provision is applicable on individuals and HUFs who are not liable for tax audit under clause (a) and (b) of Section 44AB of the Income Tax Act, 1961.

It may be noted that the Central Board of Direct Taxes (CBDT) had some time back this year notified the rules for withholding tax on rent payment exceeding Rs 50,000 to a resident by an individual or HUF. Prior to the amendment by the Finance Act (FA) 2017, the Indian tax laws (ITL) required any person liable to pay rent to residents for use of any land/building exceeding an annual amount of Rs 180,000 to withhold tax at the rate of 10%. However, individuals and HUF not liable to tax audit under the ITL were excluded from the obligation of withholding tax.

“In order to widen the scope of withholding tax, the Finance Act 2017 introduced a new provision in the Indian tax laws to provide that individuals or HUF (other than those liable for tax audit under the tax laws) responsible for paying to a resident, on or after 1 June 2017, any income by way of rent exceeding Rs 50,000 for a month or part of month during the tax year, shall deduct an amount equal to 5% of such income as income tax thereon,” EY had informed in a tax alert earlier.

In order to reduce the compliance burden, the Finance Act 2017 provides that the deductor is not required to obtain Tax Deduction Account Number (TAN) and is liable to deduct tax only once in a tax year. The tax should be deducted at the time of credit or payment (whichever is earlier) of rent for the last month of the tax year or last month of tenancy if the property is vacated during the year, as applicable.

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