What are Sections 194-IB &194-IC Under Income-tax Act

Sections 194-IB and 194-IC under the Income Tax Act play a pivotal role in regulating tax deduction at source (TDS) on specific transactions. These provisions aim to ensure compliance while simplifying tax processes for individuals and entities. Section 194-IB is applicable to rent payments, whereas Section 194-IC deals with joint development agreements. Understanding these sections is crucial for taxpayers to avoid penalties and ensure seamless compliance.

Section 194-IB mandates that individuals or Hindu Undivided Families (HUFs) deduct TDS on rent payments exceeding Rs. 50,000 per month. This provision applies to taxpayers who are not required to undergo a tax audit. The deducted TDS must be deposited with the government, ensuring accountability in high-value rental transactions.

The applicable TDS rate under Section 194-IB is 5%. This rate is designed to simplify compliance for individuals and HUFs while maintaining fairness in tax collection. If the payee does not provide a PAN, the rate increases to 20%.

Section 194-IC applies to income arising from joint development agreements. It mandates that the developer deduct TDS on monetary consideration paid to the landowner. This ensures tax compliance in property development transactions and transparency in income reporting.

TDS under Section 194-IC must be deducted at the time of crediting the monetary consideration to the landowner’s account or during payment, whichever is earlier. This provision ensures timely tax deduction and compliance.

The following table outlines the deadlines for depositing TDS under Sections 194-IB and 194-IC:

The following table summarises the modes available for TDS payment on rent under Section 194-IB:

Failure to deduct TDS or deposit it within the prescribed timeline attracts penalties. Under Sections 194-IB and 194-IC, the following penalties apply:

• Interest: Interest is charged at 1% per month for non-deduction and 1.5% per month for late deposit.
• Penalty: A penalty equal to the amount of TDS may be levied for non-compliance.

Follow these steps to pay TDS online under Section 194-IB:

1. Visit the government’s e-payment portal.
2. Select ‘Challan No./ITNS 281’ under the TDS/TCS section.
3. Fill in the required details, including PAN, rent amount, and TDS amount.
4. Proceed to make the payment using net banking or debit card.
5. Save the receipt for future reference.

Sections 194-IB and 194-IC under the Income Tax Act are essential for ensuring compliance in rental and property development transactions. Taxpayers must adhere to these provisions to avoid penalties and streamline their tax obligations. By understanding these sections, individuals and entities can contribute to a transparent and efficient tax system.