Form 26QC is a challan-cum-statement used for reporting TDS on rent under Section 194-IB. It must be submitted by individuals or Hindu Undivided Families (HUFs) who are tenants and are not required to undergo tax audit under Section 44AB. If the rent paid to a resident landlord exceeds Rs 50,000 per month, the tenant must deduct TDS at the rate of 5% on the total annual rent and deposit it to the central government using Form 26QC.

Applicability of TDS on Rent

The applicability of TDS on rent through Form 26QC is defined by specific conditions:

●     Tenant Type: Applicable to individuals or HUFs who are not required to get their accounts audited under Section 44AB.

●     Landlord Residency: The property owner (landlord) must be a resident of India.

●     Rent Threshold: Monthly rent must exceed Rs 50,000.

This means even if the tenant is not running a business or profession that is liable to audit, but the rent amount is above the threshold, they are required to deduct and deposit TDS.

Rate and Calculation of TDS

The TDS is deducted at 5% of the total rent paid or payable for the financial year. For example, if the rent is Rs 60,000 per month, the total annual rent is Rs 7,20,000. The TDS amount would be 5% of Rs 7,20,000, which is Rs 36,000.

Importantly, the TDS is to be deducted only once during the financial year or at the end of the tenancy (whichever is earlier), and not on a monthly basis.

Due Date and Payment Timeline

The tenant must deposit the deducted TDS amount within 30 days from the end of the month in which the deduction is made. For example, if TDS is deducted in the month of March, the payment must be made by April 30.

Form 26QC must be filed within the same timeline. The form serves as both the challan and the statement, simplifying the process for individual tenants.

Steps to File Form 26QC

Filing Form 26QC is a straightforward process done through the online portal. Here's a step-by-step breakdown:

1. Visit the TIN-NSDL website and navigate to the "TDS on Rent of Property" section.
2. Select Form 26QC from the options provided.
3. Enter Required Details, including:
   
   

○     PAN of tenant and landlord

○     Amount of rent

○     Duration of the tenancy

○     Amount of TDS

○     Property details such as address and type

4. Choose Mode of Payment:

○     E-Payment (Net Banking): Allows direct payment online.

○     E-Payment via bank branch: Generates a challan to pay offline at an authorized bank branch.

5. Confirm and submit the form.
6. Acknowledgment Number is generated post successful submission. It should be saved and printed for future reference.

Issuing Form 16C to the Landlord

After successfully filing Form 26QC and depositing the TDS, the tenant must issue Form 16C to the landlord. This form serves as a TDS certificate and must be furnished within 15 days from the due date of filing Form 26QC.

Form 16C can be downloaded from the TRACES portal. It contains:

●     Details of rent paid

●     TDS amount deducted and deposited

●     PAN details of both tenant and landlord

Issuing Form 16C ensures transparency and allows the landlord to claim TDS credit while filing their income tax returns.

Penalties for Non-Compliance

Failure to comply with the rules under Section 194-IB and Form 26QC filing can result in various penalties:

1. Late Deduction of TDS: Interest @1% per month (or part thereof) from the date TDS was deductible to the actual date of deduction.
2. Late Payment of TDS: Interest @1.5% per month from the date of deduction to the actual date of payment.
3. Late Filing of Form 26QC: A late fee of Rs 200 per day under Section 234E, until the failure continues (subject to the TDS amount).
4. Failure to Issue Form 16C: Penalty of Rs 100 per day until the certificate is issued.

To avoid these penalties, tenants must ensure timely deduction, payment, and filing.

Frequently Asked Questions

Q1. Is TDS deducted monthly or annually?
 TDS is deducted once annually or at the end of the lease term, not monthly.

Q2. Is a TAN (Tax Deduction Account Number) required to file Form 26QC?
 No, individual tenants are not required to obtain a TAN for this purpose. Only PAN is mandatory.

Q3. Is Form 26QC applicable for commercial properties?
 Yes, it applies to both residential and commercial properties, as long as the rent exceeds Rs 50,000 per month.

Q4. What happens if there are multiple tenants or landlords?
 Each tenant must deduct and deposit their proportionate share of TDS using separate Form 26QC for each landlord.

Conclusion

Form 26QC is an important compliance requirement under the Income Tax Act for tenants paying high-value rent. It simplifies the process of deducting and depositing TDS without the need for a TAN. By adhering to the due dates and correctly filing Form 26QC, tenants ensure lawful conduct and avoid unnecessary penalties. Issuing Form 16C further completes the cycle and ensures transparency between the tenant and landlord. Understanding and fulfilling these obligations strengthens the rental ecosystem while promoting better tax administration.