The tenant should keep all the necessary documents like rent agreement, rent receipts and proof of TDS payment properly.
Recently, the Income Tax Department had issued a new brochure. In this, Section 194-IB of the Income Tax Act was explained in detail. Under this section, it is the responsibility of the tenant to deduct Tax Deducted at Source (TDS) from the rent of the house. This tax has to be deducted before paying the rent to the landlord.
It has been said that this helps the tax officials to keep an eye on the landlord’s income from rent. However, this rule of deducting TDS applies only when your monthly rent is more than Rs 50 thousand.
What will happen if TDS is not deducted or deposited?
Under Section 194IB, if tax is not deducted, the person i.e. the tenant can be considered a defaulting taxpayer. Apart from this, interest and penalty will also have to be paid for not deducting tax. Apart from this, the tax which was not deducted can be recovered from the tenant.
According to Economic Times, Chartered Accountant Mayank Mohanka, partner, SM Mohanka & Associates and founder of TaxAaram.com, said, “Non-deposit of TDS may lead to proceedings under section 201(1)/(1A), in which such person can be considered as a defaulting taxpayer. As a result, such person will have to pay the defaulted TDS amount along with penal interest at the rate of 2.5 per cent per month for the default period.” Mohanka explains a possible solution to this problem, saying, “If such person furnishes a certificate of CA in Form 26A as per rule 31ACB stating that the landlord has duly furnished such rental income to the Income Tax department in his income tax return and has paid the tax due on such rental income, such person shall not be treated as a defaulter taxpayer, but, nevertheless, such person shall be liable to pay simple interest at the rate of 1 per cent on such rental income from the date when the TDS was to be deposited till the date of payment of tax due by the landlord.”
Consequences of non-deduction and non-deposit of TDS
Mohanka says that non-deduction and non-deposit of TDS on rent can have a serious consequence. It can lead to initiation of prosecution proceedings under section 276B resulting in imprisonment for a term of 3 months to 7 years if such person fails to deduct and deposit the TDS by the due date of filing of quarterly TDS return in which the rent was paid.
However, if a person proves that there was genuine and reasonable cause for not deducting TDS as per the provisions of section 278AA, prosecution proceedings can be avoided.”
How to avoid penalty?
The tenant should keep all the necessary documents such as rent agreement, rent receipts and proof of TDS payment in a proper manner. By deducting and depositing TDS on time, you can avoid unnecessary penalties and comply with tax rules easily.”
What is Form 26QC?
Form 26QC is a quarterly statement that outlines the tax deductions made under section 200(3) of the Indian Income Tax Act (ITA). It deals with salaries at the end of the quarter. It shows how much salary the employer has paid to the employees and how much tax has been deducted from their salary. Form 24Q also provides details of salary and TDS deducted. If no tax has been deducted or the tax deducted is less than the requirement, then the reason for it has to be explained.
How to fill Form 26QC?
Go to NSDL website www.tin-nsdl.com. After this, go to the ‘Services’ section and select ‘TDS on Property (194IA)’. Here in the TDS on Property section, select Form 26QC and then choose the option to fill the online form for TDS on Property.
After this, give the details of the buyer and seller of the property. In this, give the PAN of the buyer, PAN of the seller. After this, submit the information about the date of transaction, total sale price of the property, type of payment, type of property, payment details etc.
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