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Form 16C – TDS Certificate for Rent

Form-16C-Income Tax

Form 16C – TDS Certificate for Rent

The Government of India has inserted a new Section 194IB in the Income Tax Act to bring the high rental income groups within the ambit of tax. All Individuals and HUFs who pay rent of Rs 50,000 or above will now have to deduct TDS. Normally, for deducting TDS, TAN registration is required. However, under the new provisions, taxpayers can deduct tax by quoting their PAN and then issue Form 16C, which is the newly provided format for TDS certificate that is to be issued by rent payer to the rent receiver.

TDS on Rent

As per Finance Act, 2017, “TDS on Rent” under section 194-IB is liable to be deducted by Individuals or HUFs who are responsible for paying to a resident a monthly rent exceeding ₹ 50,000. Section 194-IB of the Income Tax Act, 1961 states that for all the transactions with effect from June 1, 2017, tax at 5% rate should be deducted by the tenant of the property at the time of making payment of rent. TDS should be deducted at the time of credit or rent payment (whichever is earlier) 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 rent will be paid to the landlord after deduction of TDS.

Form 26QC

The TDS deducted should be deposited to the Government’s Account within a period of 30day from the end of the month in which the deduction is made. The TDS deducted must be remitted in any of the authorised bank branches along with challan-cum-statement in Form 26QC. Form 26QC is reproduced below for reference:

Form 26QC

Form 16C – TDS Certificate for Rent

Any person who has deducted TDS on rent under section 194-IB should provide to the deductee or landlord, a TDS certificate in Form 16CForm 16C must be provided to the landlord or deductee within 15 days of filing Form 26QC or remitting the TDS payment in an authorised bank. A sample of the format which should be used for Form 16C is reproduced below for reference:

Form 16C

Changes to TDS Rate on Rent

Until 31st March 2017, TDS was deducted @ 10 % by only those individuals/HUFs for whom tax audit is applicable. So, individuals/HUFs who were not covered under tax audit were excluded from deducting TDS irrespective of the amount of rent payment. But now such individuals or HUFs are also required to deduct TDS @ 5% if the payment of rent is Rs 50,000 or above.

Section 194-IB

The following is the bare Income Tax Act through which the above-mentioned changes have been implemented to TDS on rent:

Insertion of new section 194-IB.

'194-IB. Payment of rent by certain individuals or Hindu undivided family.—(1) Any person, being an individual 
or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for 
paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month 
during the previous year, shall deduct an amount equal to five per cent of such income as income-tax thereon.
(2) The income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, 
for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, 
as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft 
or by any other mode, whichever is earlier.
(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of 
this section.
(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction 
shall not exceed the amount of rent payable for the last month of the previous year or the last month of 
the tenancy, as the case may be.
Explanation.—For the purposes of this section, "rent" means any payment, by whatever name called, under any lease, sub-lease, 
tenancy or any other agreement or arrangement for the use of any land or building or both.'.