Section 194IB- TDS on payment of Rent by Individuals and HUF

1. Any person, being an individual or a Hindu Undivided Family, responsible for paying to a resident any income by way of rent exceeding 50,000 for a month or part of a month during the previous year, shall deduct an amount equal to 5% of such income as income tax thereon.

2. Section 194IB shall not be applicable on those individual/ HUF who are required to deduct TDS under section 194I.

3. Tenant can be resident or non-resident. Both are liable to deduct TDS under this section.

4. TDS shall be deducted at the time of credit of rent, for the last month of the previous year or the last month of tenancy, whichever is earlier.

5. In case the landlord does not have PAN, then instead of 5%, TDS will be deducted @ 20% because of section 206AA of the income tax act, 1961. However, total TDS cannot exceed last month rent.

6. TDS shall be deducted only on the component of rent paid for the use of land or building. Any other thing taken on rent e.g. Furniture, shall not be covered.

7. TDS deducted under this section shall be payable within 30 days from the end of the month in which deduction is made. For tax deducted in March, 2018, is payable by 30th April, 2018.

8.The land or building taken on rent can be used for any purpose i.e. it can be commercial or residential.

9. Examples: Implications
1A person stays in rented house from April 2017 to July 2017 and paid rent @ 55,000 per monthHe is liable to deduct TDS @ 5% on 2,20,000. The same shall be deducted from the rent of July 2017.
2A USA resident came to India for 2 months and took guest house on rent and paid 1,40,000 for 2 months.TDS shall be deducted under section 194-IB on 1,40,000 @ 5%
3Mr. A is paying rent @ 48,000 till February. Rent is increased to 52,800 per month w.e.f. MarchMr. A is required to deduct TDS under this section on whole amount of rent paid i.e. 5,80,800 @ 5%
4Mr. x is paying rent 52,000 per month. However the landlord, who is 80 years old, does not have PAN.Mr. X is required to deduct TDS @ 20% under section 206AA since the landlord does not have PAN. TDS on 6,24,000 @ 20% shall be 1,24,800. However, as per this section, total TDS cannot exceed the last month rent. Therefore total TDS shall be 52,000.
5Mr. P is paying rent of 60,000 per month. The house which is taken on rent is jointly owned by Mr. Y and Mrs. Y. Mr. P pays per month 30,000 each to both.Mr. P is not required to deduct TDS under section 194IB since rent to a person does not exceed 50,000 per month.
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