From 1st of June 2017, all individuals and HUFs (Hindu Undivided Families) who pay a rent of Rs 50,000 or more to a landlord, have to deduct a TDS (tax deducted at source) at the rate of 5 percent. Earlier, only those individuals or HUFs who required to conduct a tax audit had to deduct a 10 percent TDS.
This requirement was introduced so that large rental income of landlords are reported to the income tax department.
Relaxation of requirements
- As mentioned before, the TDS was only applicable to those that required getting a tax audit done. Since the TDS is now extended to individuals and HUF that do not need to comply with the tax audit but pay a rent of Rs 50,000 and above, the requirement of TAN (Tax Deduction and Collection Account Number) is relaxed. This means you do not need to submit TAN details as there is no tax audit requirement.
- The landlord can also take the credit benefit of TDS on their total payable tax will filing returns.
- It is only needed to be filed once a year.
When should you file your TDS on rent?
- The tax will be deducted in the last month of the financial year, which is March. The last day to comply with the TDS requirements for March without penalty is 30th April. (Assuming that usually, one pays the rent for the current month in the succeeding month). It is the last day you can submit the form, which means you have 30 days after the end of the financial year to do it.
- If you vacate the house in the middle of the year, you can file the TDS for the last month of your tenancy.
- Deduct TDS at the time of crediting the rent to your landlord (last month of the FY or last month of your tenancy, whichever is first).
Which form is used to file TDS on rent?
- You have file and submit Form 26QC. It is challan cum payment form available online.
- Fill the form at www.tin-NSDL.com with details like landlord's PAN email ID and phone number, the address of your rented property, the TDS applicable, etc.
- If the property is owned by more than one person, you can fill the "multiple Form 26QC", which allows you to enter PAN of multiple landlords.
- You can pay your tax via net banking, debit or credit card. You can also choose to pay at a later date using the e-payment on subsequent date' option or even pay offline through authorized bank's branches.
- After 3 to 7 days of filing your TDS, you should get a Form16C, which is your TDS certificate. You need to furnish it to your landlord within 15 days of depositing the TDS, so if you had paid your tax on 15th of April, you need to give the Form 16C by 30th of April and not 15 days after receiving the certificate.
- Form 16C is available on www.tdscpc.gov.in for download.
Consequences of not complying with TDS on rent
- 1% interest per month is charged on delay in tax deduction. It is 1.5% if tax is deducted but not deposited.
- A late fee of Rs 200 per day is applicable on delay in submitting form 26QC. Delay in issuing Form 16C attracts Rs 100 per month penalty.
- If you fail to file Form 26QC for a year, a Rs 10,000 to Rs 1 lakh penalty could be levied on you.