Form 26QC is a tax-related form under the Income Tax Act of India. It is designed for individuals or entities who are required to deduct Tax at Source (TDS) on the rent they pay to a landlord. This form is to streamline the TDS process for rent payments and also ensure that the taxes are paid correctly on time.
Who Needs to File Form 26QC?
Form 26QC must be filed by individuals or Hindu Undivided Families who are tenants of a property and also making monthly rent payments above ₹50,000. This applies only if the landlord is not a company or a firm. According to Section 194-IB, TDS is required to be deducted if the monthly rent exceeds ₹50,000. In such cases, the tenant must deduct 5% of the total rent paid during the month and deposit the amount with the government.
The tenant has to file Form 26QC for each month where the TDS is deducted. This form must be submitted online through the Income Tax Department’s portal. The TDS amount deducted is then paid to the government.
How to File Form 26QC?
The tenant needs to file Form 26QC online through the Income Tax Department’s portal. The form asks for details such as:
- Tenant’s Information: Name, PAN, address, etc.
- Landlord’s Information: Name, PAN, address, etc.
- Rent Details: The amount of rent paid and the TDS deducted.
- Payment Information: The amount of TDS deposited.
Once the form is filed, the tenant will receive a receipt. The tenant is also required to provide the landlord with a TDS certificate in Form 16C. This certificate helps the landlord claim the deducted TDS while filing their own income tax return.
If your landlord is a Non-Resident Indian (NRI), you must file Form 27Q instead of Form 26QC, regardless of the rent amount. Form 27Q is filed quarterly and also applies to payments made to NRIs.
Example:
Let’s say Mr. A is renting a property from Mr. B for ₹60,000 per month. As per Section 194-IB, Mr. A, being the tenant, needs to deduct TDS at 5% on the monthly rent. The TDS amount would be:
TDS = ₹60,000 × 5% = ₹3,000.
Mr. A will file Form 26QC, mentioning the rent paid (₹60,000) and the TDS deducted (₹3,000). After filing the form, Mr. A will also receive a receipt and provide Mr. B with a TDS certificate in Form 16C, which Mr. B can use for tax filing purposes.
Penalties for Non-Compliance:
Failure to deduct and deposit TDS could result in penalties. If you don’t file the form in time, interest is charged at a rate of 1.5% per month, along with a late fee of ₹200 per day.
Conclusion:
Form 26QC plays a vital role in ensuring compliance with tax laws related to rent payments. It simplifies the process of TDS deduction and also ensures transparency between tenants and landlords. By filing the form and providing the TDS certificate, both parties thus fulfill their obligations under the Income Tax Act.
– Ketaki Dandekar (Team Arthology)
Read more about Form 26QC here – https://www.taxbuddy.com/blog/26qc