Section 1941 b and section 1941 c under Income Tax Act is the section that deals with payments and rents related to sub-lease, lease, tenancy, and for other buildings such as factories, Machinery, land, furniture, plant, and many others.
The income of rent is considered under TDS provisions by the government. To understand the concept of sections 1941b and 1941 c under the Income Tax Act, it is important to understand what is section 1941.
Section 1941 deals with TDS on Rent. Section 1941 b deals with TDS applicable on payment of the rent by certain individuals.
In addition, section 1941 c deals with TDS on the rent payment under a certain type of situation or agreement.
Section 194I of the Income Tax Act
Income Tax rules and provisions for TDS on rent are covered in section 1941. TDS on individuals will be deducted if the rent is paid to certain Indian residents over a certain limit which is Rs.2,40,000 in a year.
The types of friends under the section includes rent for buildings, machines, houses, office, furniture, and many others.
The main aim of section 1941 and provisions on the rent was to have TDS provisions because rent is also a source of income for certain people, which was escaping tax provisions.
Any person who is paying rent to an Indian resident is subjected to a deduction of TDS under section 1941.
What is rent as per Section 194I of the Income Tax Act
Rent has a different definition from section 1941 of the Income Tax Act. Rent is a payment that is made under the sublease, lease, tendency, and any agreement with respect to the following:
- Furniture
- Types of equipment
- Fittings
- Land
- Machinery
- Building
- Plant
Limit and rate of tax deduction as per section 1941 of the Income Tax Act
- The tax rate under this section is 2% for using any machine, equipment, and plant.
- The tax rate under the section is 10% for using any land or building, including factories, furniture, and fittings.
- The amount of rent that is paid to Indian residents was limited to only 180000. It could not exceed this limit. But from the past financial year of 2019- 2020, this limit was changed to 240000.
Special Considerations of Section 194I of the Income Tax Act
- The warehousing charged, which is also counted as the amount paid, is also liable for the deduction of TDS as per section 1941.
- The payment made as the security deposit to any owner is not liable for the deduction of TDS as per section 1941 only if the amount can be refunded. But if the security deposit can be adjusted based on the rent, then it is liable for the deduction of TDS.
- A payment or rent which is made to rent of business office or centre is also liable for the deduction of TDS as perception 1941.
- If any accommodation or room is taken regularly in a hotel under any agreement, then its payment or rent is also considered for deduction of TDS under this section.
It is important to know if any of these payments or rent are made under any agreement, but later on, they can be reimbursed or refunded, then they are not liable for deduction of TDS under section 1941.
Section 194IB of the Income Tax Act
As we know, section 1941 under Income Tax Act deals with the deduction of TDS on any individual's payments made for buildings, machinery, and others.
So to widen the concept of deduction of TDS for those individuals whose payments or rents were not coming under section 1941, section 1941 b was introduced on budget.
This section was introduced in 2017. According to the section, any person or individual who is not liable to audit as per 44AB pays rent to any Indian resident as income is liable for the deduction of TDS under this section.
Limit and rate of tax deduction as per section 1941 B of the Income Tax Act
- The rate of deduction as per this section is 5%.
- If the Pan of the individual or recipient is not available, then the rate of deduction increases to 20% under section 206AA.
- The rate of deduction is 10% if the rent is only paid to a specified person under an agreement according to section 206AB.
- The amount of TDS detected cannot exceed the amount of rent that was paid last month.
- No TDS will be deducted if the rent is paid less than 50,000 rupees in a month.
- TAN is not required for the deduction of TDS on rent payments.
Section 194IC of the Income Tax Act
This section under Income Tax Act is introduced recently. This section's main objectives are rent and payments under Joint Development Agreements.
The deduction of TDS under these agreements is liable for the payments or rent that is made by an individual to a resident under Joint Development Agreement for any consideration.
Joint Development Agreement is an agreement between a person who owns a building or land and an individual who is on rent on that land and has permission to build his own real estate where the owner gets a profit share.
Limit and rate of tax deduction as per section 1941 C of the Income Tax Act
- If the Pan of the individual or recipient is not available, then the rate of the deduction increases to 20%.
- The rate of deduction is 10%.
Time duration to deposit TDS
The time duration for the deposition of TDS is fixed every month. The TDS is to be paid on the 7th of every month except March.
In addition, the amount of TDS is to be paid on 30th March. A challan cum statement under the form is also needed to be filled under Form 26QC for rents as well as payments under section 1941b of the Income Tax Act.
It is important to fill out this form within 30 days of the deduction of TDS. Tenants need to detect as well as pay taxes to the government.
Penalty for delayed return filing and delayed payment
- Section 201(1A): this action deals with the provisions of late payments of TDS. If the TDS is deducted but still hasn't been paid to the government, then the following penalties are applicable:
- A case interest of 1.5% is charged monthly or for a few weeks.
- This interest is charged on the value of TDS from the day it was deducted.
- It will be charged till the day of deduction of TDS.
- Section 271H: according to this section, the Assessing officer can charge a penalty that can range from Rs. 10,000/- to Rs.1,00,000/-. This penalty can only be charged for a few cases, such as
- If the TDS is filed 1 year prior to the due date before the period of expiration.
- If the late filing fees, TDS deducted, and amount of interest is not paid to the government.
- Section 234E: This section states that a penalty of rupees 200 can be charged per day until the day of the deduction of TDS if it is late. If the return is required to file, then the amount of penalty should be less than the amount of TDS. In other words, the value of the penalty cannot exceed the value of TDS. For example, if the total number of delay days is 15, then the total penalty amount for 15 days is 30,000 rupees (15*200). And if the amount of TDS is 2500 rupees, then the maximum penalty filed can be 2500 only.
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Conclusion
Section 1941 b of the Income Tax Act deals with the deduction of TDS as tax to the government on the payments made by an individual to Indian residents on rents of properties such as buildings or lands because it is also a source of income for certain people.
Section 1941 C of the Income Tax Act, as recently introduced, deals with the rent payments made under a Joint development agreement.
These are the agreements or deals between the owner of a land or building and a real estate developer who has permission to build something on the individual's land.
A share or profit of this real estate goes to the owner of this land. According to this section, rent is a payment or amount which an individual pays to the owner of a house or building under any agreement or lease.
These agreements or arrangements can be made for properties, including buildings, houses, factories, land, plant, equipment, fittings, machinery, and others.
The rates and penalties on the deduction of TDS are based on the type of sections as well as agreements.
Nevertheless, it is the duty of tenants in India to pay tax as a deduction of TDS based on the amount of rent and payments because they are also a source of income for certain owners of properties.
FAQs Related to What is Section 194IB & 194IC under Income Tax Act
1. What is Section 194IC of the Income Tax Act?
This section of the Income Tax Act is recently introduced. This section deals with the deduction of TDS and the rent or payments made under joint development agreements. So any individual or resident that is paying and receiving rent under this agreement is subjected to the deduction of TDS.
2. How to pay TDS under section 194IC?
According to section 1941, C TDS will be paid when the amount is credited to the account of the payee or at the payment time, whichever option is chosen earlier. For the purpose of payment of PDS for this activity, the amount can be paid as cheque, cash, and draft.
3. What is the difference between 194i & 194ib?
Section 1941 under Income Tax Act deals with the tenants, which can be either HUF or individuals that pay rent to Indian residents or are subjected to the deduction of TDS or tax given to the government. Section 1941 B under Income Tax deals with the tenants that can be either HUF or individuals whose accounting books are not liable during the financial year for a tax audit.
4. How can a landlord pay TDS on rent?
A landlord can pay TDS on rent through an online payment. This can be done through the e-tax payment option on the spot. E-tax payment option can also be made by internet banking account. Payment can also be made by visiting the local authorized Bank branch. In addition, these Bank branches will make e-payment without any challan digitalization.
5. What is the 194I TDS threshold limit?
The person who is not an individual that pays the rent but the owner of the property that has to pay TDS is level for the deduction of tax or TDS amount. According to section 1941 of the Income Tax Act, the TDS threshold limit is Rs 2,40,000 for the financial year. The previous threshold limit was Rs. 1,80,000 till the financial year 2018 and 2019.
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