It’s easy to overlook, but a simple TDS (Tax Deducted at Source) mistake cost one tenant a hefty Rs 1 lakh fine, even though he was regularly paying Rs 55,000 in monthly rent. This serves as a crucial reminder for anyone renting property in India.
The Costly Oversight
Abhishek, a tenant, found himself in hot water with the Income Tax Department. He was diligent about paying his Rs 55,000 monthly rent, but he neglected to deduct the mandatory TDS on the rent amount and, consequently, failed to file the TDS challan-cum-return statement.
Sujit Bangar, founder of Taxbuddy.com, highlighted that this oversight triggered Section 271H of the Income Tax Act, 1961. This section stipulates that failing to comply with TDS provisions and not filing a TDS statement can lead to a penalty ranging from a minimum of Rs 10,000 up to Rs 1 lakh.
Who Needs to Deduct TDS on Rent?
Not every tenant needs to worry about TDS. As per Section 194-IB of the Income Tax Act, 1961, TDS provisions apply to individuals (or HUFs, excluding those liable for tax audit) who pay a monthly rent exceeding Rs 50,000. If you fall into this category, you are required to deduct 2% as TDS from the rent payment.
Your Guide to TDS on Rent (Form 26QC)
Here’s what tenants need to do to stay compliant and avoid penalties:
1. Deduct TDS
- If your monthly rent is above Rs 50,000, you must deduct 2% as TDS. If your landlord doesn’t provide their PAN, the TDS rate increases to 20%.
2. File Form 26QC Online
This form is essentially a challan and a statement combined. Here’s how to file it:
- Visit TIN-NSDL: Head over to www.tin-nsdl.com.
- Navigate: Go to “Services” > “TDS on Rent of Property” > “Form 26QC.”
- Select Form: Choose Form 26QC and click “Proceed.”
- Enter Your Details: Provide your PAN, name, address, and contact information. An OTP verification will follow.
- Add Landlord Details: Input your landlord’s PAN, name, and address.
- Fill Property/Rent Details: Enter the property address, details from your rent agreement, the total rent paid, and the tenancy period.
- Specify TDS Details: Enter the 2% TDS rate, the deduction date, and the amount.
- Choose Payment Mode: You can pay online using net banking/debit card or opt for offline payment at a bank.
- Review & Submit: Double-check all the details, enter the captcha, and submit. If paying online, complete the payment immediately. If paying offline, save the challan to pay at an authorized bank.
- Complete Payment: Ensure the TDS amount is paid either online (you’ll get a CIN) or offline.
3. Download and Share Form 16C
- After filing and payment, log in to www.tdscpc.gov.in (TRACES website) and download Form 16C within 15 days.
- Provide this Form 16C to your landlord. This acts as proof that you’ve deducted and deposited the TDS, allowing them to claim credit when filing their income tax return.
Important Things to Know
- TDS Rate: It’s 2% (or 20% if your landlord’s PAN isn’t available).
- Due Date: File Form 26QC within 30 days of the financial year-end, when you vacate the property, or when the agreement terminates, whichever comes first.
- Penalties:
- Late Filing of Form 26QC: Rs 200 per day.
- Late Issuance of Form 16C: Rs 100 per day.
- Non-filing/Non-compliance: A penalty between Rs 10,000 and Rs 1,00,000 under Section 271H.
- No TAN Needed: Unlike other TDS deductions, you don’t need a TAN; your PAN is sufficient.
- Verify: Landlords should check their Form 26AS to confirm the TDS deducted by the tenant is correctly reflected.
This case is a stark reminder: compliance with TDS provisions is non-negotiable for tenants paying high rents. Are you sure you’re up to date on your tax responsibilities as a tenant?