Section 194-IB of the Income Tax Act, 1961

Section 194-IB of the Income Tax Act, 1961

Section 194-IB of the Income Tax Act, 1961, covers the tax deduction at source (TDS) on rent payments made by individual and Hindu Undivided Family (HUF) tenants to landlords. Here’s a detailed explanation of its application:

1. Applicability of Section 194-IB

Section 194-IB applies to individuals or HUFs who are not required to get their accounts audited under the Income Tax Act (i.e., individuals and HUFs who are not in the business or profession requiring audit).

If the monthly rent payable exceeds ₹50,000, TDS under Section 194-IB becomes applicable.

2. Key Points of Section 194-IB

TDS Threshold: TDS is required if the monthly rent payable exceeds ₹50,000. If the rent is ₹40,000 per month, Section 194-IB does not apply because it is below the ₹50,000 threshold.

TDS Rate: The TDS rate under Section 194-IB is 5% of the total rent amount.

Timing of Deduction: The tenant needs to deduct TDS only once at the time of payment or at the end of the financial year, whichever is earlier.

Landlord’s PAN Requirement: The landlord must provide their PAN. If the PAN is not provided, TDS may be deducted at a higher rate of 20%.

3. Calculation Example for Rent Over ₹50,000

Suppose the rent is ₹60,000 per month. Here’s how TDS would work:

Annual Rent: ₹60,000 * 12 months = ₹7,20,000.

TDS Calculation: TDS at 5% of ₹7,20,000 = ₹36,000.

Payment Process: The tenant should pay the TDS amount (₹36,000) to the government and provide the balance (₹6,84,000) to the landlord over the year.

4. Process of Paying TDS under 194-IB

Challan Payment: TDS is deposited via Challan-cum-Statement Form 26QC.

Tenant Responsibility: The tenant must fill out Form 26QC and pay the TDS to the government.

TDS Certificate (Form 16C): After depositing the TDS, the tenant should issue a Form 16C (TDS certificate) to the landlord as proof of deduction.

5. Non-Applicability in Your Case

Since your monthly rent payment is ₹40,000, it falls below the ₹50,000 threshold under Section 194-IB. Therefore, no TDS is required on this rental payment.