Introduction:
Section 194IB of the Income Tax Act, 1961 is a recent provision introduced by the Finance Act, 2017. This section deals with the tax deducted at source (TDS) on rental income paid to resident individuals or Hindu Undivided Families (HUFs). In this blog, we will understand the provisions of section 194IB and the compliance requirements for deductors.
Who is liable to deduct TDS under section 194IB?
As per the provisions of section 194IB, any person, other than an individual or HUF, who is paying rent to a resident individual or HUF exceeding Rs. 50,000 per month or part of the month is liable to deduct TDS at the rate of 5% on the amount paid.
What is the rate of TDS under section 194IB?
The rate of TDS under section 194IB is 5% of the amount paid as rent. It is important to note that this rate is applicable only when the rent exceeds Rs. 50,000 per month or part of the month.
When should the TDS be deducted and deposited?
The TDS under section 194IB should be deducted at the time of credit of rent to the account of the payee or at the time of payment of rent in cash or by any other mode, whichever is earlier. The deducted TDS should be deposited to the credit of the central government within 30 days from the end of the month in which the TDS is deducted.
What are the consequences of non-deduction or non-payment of TDS under section 194IB?
If the deductor fails to deduct TDS under section 194IB, he/she shall be liable to pay interest at the rate of 1% per month or part of the month on the amount of TDS from the date on which such tax was deductible to the date on which it is deducted. In case of non-payment or late payment of TDS, the deductor shall be liable to pay interest at the rate of 1.5% per month or part of the month on the amount of TDS from the date on which such tax was deducted to the date on which it is actually paid.
What is the compliance requirement for deductors?
Deductors are required to obtain a Tax Deduction Account Number (TAN) and quote it on all TDS returns, challans, and certificates. The deductors are also required to file quarterly TDS returns in Form 26Q electronically with the Income Tax Department. The due date for filing the quarterly TDS return is 31st July, 31st October, 31st January, and 31st May for the quarters ending on 30th June, 30th September, 31st December, and 31st March respectively.
Conclusion
Section 194IB of the Income Tax Act, 1961 is a significant provision that helps in ensuring the collection of tax on rental income. The provision has been introduced to bring more individuals and HUFs under the purview of TDS. The deductors need to comply with the provisions of section 194IB to avoid any legal consequences. It is important for individuals and HUFs to be aware of the provisions of section 194IB and their compliance requirements to ensure smooth and hassle-free transactions.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q:1 What is Section 194IB of Income Tax Act 1961?
A: Section 194IB of Income Tax Act 1961 is a tax deduction at source (TDS) provision that requires a tenant to deduct TDS at the rate of 5% while paying monthly rent to the landlord, if the monthly rent exceeds Rs. 50,000.
Q:2 Who is required to deduct TDS under Section 194IB?
A: The tenant is required to deduct TDS under Section 194IB while making the monthly rent payment to the landlord, if the monthly rent exceeds Rs. 50,000.
Q:3 What is the rate of TDS under Section 194IB?
A: The rate of TDS under Section 194IB is 5% of the monthly rent paid to the landlord.
Q:4 What is the due date for depositing TDS under Section 194IB?
A: The due date for depositing TDS under Section 194IB is the 30th day of the month following the month in which the TDS was deducted.
Q:5 Is a landlord required to file an income tax return if TDS has been deducted under Section 194IB?
A: Yes, the landlord is required to file an income tax return even if TDS has been deducted under Section 194IB.
Q:6 Is there any threshold limit for deducting TDS under Section 194IB?
A: Yes, TDS is only required to be deducted if the monthly rent paid to the landlord exceeds Rs. 50,000.
Q:7 What are the consequences of not deducting TDS under Section 194IB?
A: If TDS is not deducted under Section 194IB, the tenant may face penalties and interest charges.
Q:8 Can the landlord claim a refund of TDS deducted under Section 194IB?
A: Yes, the landlord can claim a refund of TDS deducted under Section 194IB while filing his income tax return.
Q:9 Is there any exemption for deducting TDS under Section 194IB?
A: Yes, TDS is not required to be deducted if the landlord is an individual or a Hindu Undivided Family (HUF) and the business or profession of the landlord does not require tax audit under Section 44AB of Income Tax Act.
