Overview: Form 26QC is a challan-cum-return form used for reporting transactions subject to TDS on rent under Section 194-IB. This section is designed for individuals or Hindu Undivided Families (HUF) who make payments towards rent for residential or commercial purposes. The procedure, including when and how to file TDS, as well as the applicable thresholds and deduction rates, is explained below.

1. Background: Payment of Rent by Individuals/HUFs

It is common for individuals and HUFs to make rent payments for office or residential use. In the 2017 Budget, amendments were made to the TDS on Rent provisions, introducing Section 194-IB, which came into effect from June 1, 2017. This section specifically covers rent paid for the use of a building or premises. If you fall under this section, you must file your TDS using Form 26QC, as detailed below.

2. What is Considered Rent?

Rent refers to any payment made for the use of land, building, or both, under a lease, sublease, tenancy, or any other agreement, irrespective of the name by which the payment is referred.

3. Understanding Section 194-IB

3.1 Applicability
This section applies to individuals and HUFs who are required to deduct TDS on rent payments. However, those whose books of accounts are subject to a tax audit are exempt from this requirement.

3.2 Threshold Limit
TDS must be deducted if the rent exceeds ₹50,000 per month (or for any part of the month).

3.3 TDS Rates
The applicable TDS rate for rent payments is 5%.

3.4 Timing of Deduction
The TDS should be deducted at the earlier of the following two events:

The last month’s rent payment for the previous year or the last month of tenancy, if the property is vacated within the year, or
The actual payment of rent (either in cash or through a bank transfer).

3.5 TAN Requirement
For TDS deductions under Section 194-IB, you do not need a Tax Deduction Account Number (TAN).

3.6 Deductee Details
The PAN of the landlord/lessor is required to be provided. If the landlord does not have a PAN, the TDS will be deducted at 20%. However, the total TDS should not exceed the rent payable for the last month.
Important: If the rented property has multiple owners, Form 26QC must be filed separately for each owner, based on their share of ownership or as per the rental agreement.

3.7 TDS Return
The deducted TDS must be paid to the government using Form 26QC (a challan-cum-return form).

4. Filing Form 26QC: How to Submit Online

Form 26QC is a statement used to report transactions subject to TDS under Section 194-IB. The form must be filed for each rent payment made during the year.

Due Date: Form 26QC must be filed within 30 days of the end of the month in which the TDS was deducted.
For example, if rent is paid in April 2021, Form 26QC should be filed by May 30, 2021.

You can file Form 26QC online via the official Income Tax website: https://www.incometax.gov.in/iec/foportal/

Required Information for Filing Form 26QC:
Before filing, gather the following details:

PAN and Name of the Tenant
PAN and Name of the Landlord
Addresses of both Tenant and Landlord
Mobile number and email addresses of both parties
Property address
Tenancy period (number of months)
Total rent payable
Rent paid for the last month
Date of payment and date of tax deduction
Type of asset (Land/Building/Both)
Bank details for payment

Ensure you have all necessary information on hand before starting the filing process as the form needs to be completed within 30 minutes.

Form Structure:
The form is divided into four sections:

Taxpayer Information
Address Details
Property Details
Payment Information

5. What is Form 16C and Why is It Important?

Form 16C is a TDS certificate issued by the tenant (deductor) to the landlord (deductee) to certify the TDS deducted and paid to the government under Section 194-IB.

Form 16C includes: