Form 16C Certificate Under TDS For Property Rent

Today’s write-up is exclusively for the rent payers who are liable to pay rent above 50,000 per month on the property. With the aim to increase the range of applicability of Tax Deduction at Source (TDS) the all-new section 194-1B (apart from section 194 - I already existing) has been enrolled in Finance Act 2017, which is operative from 1 June 2017.

This all-new section says that, if the rent exceeds some threshold limits (in this case it is 50,000 or above per month), the deductor is required to deduct 5% TDS and submit to the Government. The government further issues form 16C confirming the payment of TDS, which the deductor is liable to give to the deductee.

About Form 16C - it is a certificate issued by the deductor who is liable to deduct TDS. As per section 194 - IB this certification is essential, the deductor is answerable in case he fails to issue form 16C.

No doubt, today’s article is based on the significance of form 16C, but before the core, let's understand the crust i.e. the provisions of section 194 - IB.

Criteria under which section 194 - IB is Applicable:

1. The clause under, 194-IB applies to the individuals or HUF (Hindu Undivided Family) whose accounts are not audited under section 44AB.2. Rent can be any income paid by the individual or HUF to the resident. Rent can be any payment, it can be called a lease, sublease, tenancy or any other agreement for the use of any land or building or both. 3. The exemption limit is INR 50,000 per month or part of the month during the previous year.

TDS Deduction Rate:

As per the 194 - IB clause, the TDS deduction rate is 5%. But in case, if the deductee or the person receiving the rent fails to provide the Permanent Account Number (PAN), then the deductor is liable to deduct 20% TDS from the rent.

TDS Deduction Time:

Deductor is liable to deduct TDS either at the time of giving the rent to the payee for the last month of the relevant previous year or while vacating the property or while paying to the government in cash, draft, cheque, or any other mode.

Importance of TAN:

According to section laws, it was mandatory for the deductor to obtain a TAN (Tax deduction and Collection Account Number), whereas the new 194 - IB clause clearly states that obtaining the TAN is not mandatory for the deductor.

Terms to Submit the TDS to the Government:

As per the provisions of section 194 - IB, the deductor is liable to pay the TDS deducted within 30 days period from the end of the month in which tax is deducted. TDS is to be deposited by the deductor in the form of challan-cum-statement in form No. 26 QC.

Form 16C - Certifying TDS Payment to Government:

Rule 31 (3B) included in the Income Tax Rules has all the provisions related to the certification of TDS with reference to section 194 - IB. The deductor has to present the certificate of TDS in form 16C, within a period of 15 days from the due date of presenting challan-cum-statement in form No. 26 QC.

Late Penalty:

If the deductor fails to issue form 16C, has to pay 100 Rs per day as a penalty till the delay continues. Also one must note the government has extended the due date to issue form 16 till July for all the employers.

The government inserted section 194 - IB in spite of 194 - I already existing, let's find out the difference:

1. Section 194 - I apply to those individuals or HUF (Hindu Undivided Family) who are responsible to get their accounts audited in the relevant previous year, whereas section 194 - IB is applicable for those who are not responsible to get their accounts audited in the relevant previous year. 2. As per the 194 - I clause, the minimum tax relief limit is INR 2,40,000 per annum, whereas in section 194 - IB the limit mentioned is INR 50,000 per month. Further, in section 194 - I the deductor is liable to deduct 10% of the monthly rent as TDS, on the other hand, TDS mentioned in section 0194 - IB is 5%. 3. As per section 194 - I, TDS is deducted and deposited monthly, whereas in section 194 - IB the time period becomes once in a financial year or at the end of a tenancy. 4. Receiving a TAN is compulsory, according to section 194 - I, wherein the case of section 194 - IB, TAN is not mandatory.

Prominent Points to Remember:

1. An individual or HUF who is not liable to get their accounts audited and is a rent payer of above 50,000 INR per month should deduct and pay the TDS to the Government.2. The deductor who is responsible to deduct TDS can deposit it by Gen TDS Software (https://saginfotech.com/GeneTds.aspx) also, to the Government by filling the challan-cum-statement in form No. 26QC.3. The deductor has to deduct 5% as a TDS if he is paying 50,000 or above as monthly rent. 4. Form 16C is the certificate that confirms that the deductor has deducted and paid the TDS to the Government. 5. The deductor has to issue Form 16C to the deductee within 15 days from the due date of presenting challan-cum-statement in Form No. 26 QC.6. The penalty of Rs 100 per day is chargeable on delay in issuing Form 16C, the penalty continues till the day Form 16C is issued by the deductor.