Section 194IB & 194IC under Income tax Act

Section 194IB & 194IC under Income tax Act

Section 194IB of the Income-tax Act deals with the tax deducted at source on payment of rent. Section 194IC was introduced to bring the ‘Joint development agreement’ of real estate under the preview of TDS. An agreement between the owner of the asset and developer is known as a joint development agreement.

Section 194IB



According to Section 194IB, it is mandatory for any person, i.e. individuals / HUF not liable to audit u/s 44AB, to deduct taxes for a rent paid to a resident exceeding Rs 50,000 per month.

Meaning of Rent according to Section 194IB

According to the section, rent means a payment made by a payee under a tenancy, lease, sub-lease, or any other arrangement made for assets.
  • Land
  • Land including a factory building
  • Building including a factory building
  • Machinery
  • Furniture
  • Equipment
  • Plant
  • Fittings
  • The payee may or may not own the assets mentioned above.

Point of Deduction of TDS

TDS must be deducted, by the individuals or HUFs, earlier of:
  • At the time of credit of rent (for the last month in the previous year or the previous month of the tenancy if the property is vacated before during the year), or
  • At the time of payment (via cash or cheque or draft or any other mode).

Rate of TDS under section 194IB

The tax rate applicable is 5% if the rent payment exceeds Rs 50,000 and the landlord’s PAN is provided.
In case PAN is not available, then a TDS of 20% will be applicable.

Section 194IC



A person who pays rent to the landlord under a Joint Development Agreement (JDA) must deduct TDS under Section 194IC.

A Joint Development Agreement is an agreement of the owner of an asset (such as land or building or both) to allow a person to build a real estate project in that asset. In return, the owner receives a share and cash payment.

Point of TDS deduction under section 194IC

The deduction will be made either at the time of income credit to the payee's account or at the time of actual payment, whichever is earlier. The payment can be made in cash, cheque, draft, or other methods.

Time Limit on depositing TDS
  • The payment is made by or on behalf of the government – on the same day (without using any challan form).
  • The payment is made in any other case than the government – on or before seven days from the end of the month in which deduction is made, where tax is paid accompanied by an income-tax challan if the amount is credited or paid in March – on or before April 30. b. In any other case – on or before seven days from the end of the month in which the deduction is made.

Frequency and Mode of TDS payment

Tenants must deduct and pay the tax to the government once per financial year. A challan-cum-statement, Form 26QC, should be used to make this payment. Further, the tenant must provide Form 16C, a TDS certificate to the landlord as proof of the tax deposited. A tax deduction account number (TAN) is not necessary to make the transaction.

Applicability of Penalty in case of Non-deduction or Delay

In case of non-deduction of taxes, the tenant may have to pay a penalty that is equivalent to the amount of taxes deducted. On the other hand, if the tax deposited to the government is delayed, penal interest at 1% for delay in deducting and depositing and 1.5% for delay in depositing tax will be levied. In case of a failure on the filing Form 26CQ within 30 days from the end of the month in which tax payment is made, will result in a late fee of Rs 200 per day. Click here to know more about the deposit of TDS and quarterly returns of TDS and penal implications for TDS defaults.




For more information on this visit TAXAJ


Posted by Aashima
Team TaxaJ


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