The Central Board of Direct Taxes ( CBDT ) asked the taxpayers to remit Tax Deducted at Source (TDS) at five percent while paying House Rent above Rs. 50,000. It is mandatory for 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 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.
In June 2017, the Board notified the amended rules in connection with the new provision mandating payment of TDS on rent above Rs. 50,000/-.
With a view to reducing the compliance burden on the taxpayers, the Government inserted a provision in the Finance Act, 2017 providing 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 the tenancy if the property is vacated during the year, as applicable. The CBDT advisory said to deduct TDS at 5% of the rent for a year at the time of credit/ payment of rent to a resident for March 2019 (or the last month of the tenancy, if the property is vacated.)
The Board directed the taxpayers 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). 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. The advisory said the Landlords to provide their TAN to the tenant, verify tax deposits in their form 26AS and insist on Form 16C from the tenant.
