As amended in the Finance Act 2017, a tenant (individual or Hindu Undivided Family (HUF)) paying house rent of more than Rs50,000 a month needs to deduct tax from the rent. Such collection of tax by a tenant is known as tax collected at source (TCS). However, as per the rule, TCS on rent doesn’t have to be deducted and deposited on a monthly basis; this has to be done only once, at the end of the financial year or at the end of tenancy, whichever is earlier. Given that the current financial year (FY) is coming to an end in a few days, all tenants must ensure that they have deducted the TCS amount from the current month’s rent, latest by 31 March. Once TCS is collected, it has to be deposited with the tax department. Read on to find out how to do this.
A tenant is required to deduct tax if the monthly rent is more than Rs50,000. Where the house owner has provided her Permanent Account Number (PAN) to the tenant, the tax has to be collected at the rate of 5% of the monthly rent.
If the house owner has not given her PAN, then tax has to be deducted at a higher rate, but it should not exceed the amount of rent payable for the last month of the preceding financial year or the last month of the tenancy.
Typically, the tax has to be collected as and when a payment is made. But to make things simpler for individual tenants, TCS has to be collected only once a year or at end of the tenancy.
Besides that, to bring down the compliance burden, the tenant (deductor) doesn’t have to get a Tax Deduction Account Number (TAN).
The collected tax needs to be deposited within 30 days from the end of the month in which the collection is made. It can be deposited electronically by filling the challan-cum-statement in Form No. 26QC. This form is available on the e-tax payment system website.
To fill the 26QC form, tenants have to enter their own and the house owner’s details. This would include information such as name, PAN, address, mobile phone number and email address.
Other details that have to be provided are: number of tenants and/or house owners, period of tenancy, total value of rent paid and value of rent paid last month, amount of tax collected and the date of collection, details of tax deducted, interest and fee along with date and mode of payment.
certificate of deduction
After paying the tax and submitting Form 26QC, the tenant will be able to download Form 16C—which is a certificate of tax deducted— from the e-tax Web portal, and give it to the house owner. This should be done within 15 days of submitting Form 26QC.
Form 16C will carry details such as name and address of the deductor (the tenant), PAN, name and address of the deductee (the house owner) along with PAN, details of tax deducted and deposited, date of deposit, and more.
Remember that if a tenant does not charge TCS, or does not deposit the sum on time, it can lead to her paying interest and penalty.[“Source-livemint”]