Section 194IC of Income Tax Act

The rent constituent payments are made for leases, tenancies, sub-leases, or other arrangements of properties such as land with factory, building with factory, land, plant, machinery, or furniture and fittings.

The government has taken a rental income under the umbrella of TDS provisions through sections 194I, 194IB, and 194IC.

What is Section 194IC?

Section 194IC TDS has been recently introduced with the objective to bring rent under the scope of joint development agreements. So, any person who is paying a resident a consideration under a joint development agreement needs to deduct TDS under Section 194 IC. It is an agreement with the owner of the asset who agrees to let another person build a real estate project on such assets in return for the share or payment that was made in cash.

The rate of tax deduction is 10%, and if the PAN of the receiver is not available, then the rate will be 20%. The time of deducting tax is earlier than the credit of income to the account of the payee or actual payment. Also, there is no threshold limit under this section. 

Meaning of Joint Development Agreement Under Section 194IC

The joint development agreement is a registered contract with a property owner and a promoter to construct the new projects on the landowner's property. Based on this agreement, the promoter carries out the legal construction work.

Further, the owner will give the land, and under this agreement, the owner will be paid back in cash or in the form of shares in the property.

Rate Under Section 194IC

Mentioned below are the rates for tax deduction with Section 194IC:

  • 10% - when the rent amount is more than Rs. 50,000. The landlord's PAN details also have to be provided.
  • 20% - When the landlord's PAN details are not given.
  • 2% - When the use of machinery and equipment is there.

The challan-cum-statement, or Form 26 QC, is the payment method allowed by Section 194IC. In order to demonstrate that the tenant has deposited tax, the tenant must also furnish Form 16C.

Form 16C is also a TDS certificate. Payments can be made without a TAN (Tax Deduction Account Number).

Penalty for Late or Delayed Filing

Section 201(1A) - When the late deduction or late payment of TDS

a) In this case, the TDS has been deducted but has not been deposited to the government. Then, in that case, the interest would be levied as -

  • 1.5% for a month or a part of the month.
  • On the amount of the TDS from the date on which the TDS is deducted.
  • To the date where the TDS was deposited.

b) In the case when TDS has not been deducted, then, that case, the interest would be levied as -

  • 1% for a month or a part of the month.
  • On the amount of the TDS from the date where the TDS was deducted.
  • To the date where the TDS was deposited.

Section 234E

The penalty under this specific section is Rs. 200 for a day; then, the penalty will be calculated until the failure by the deductor.

However, the amount of penalty will not be more than the amount of TDS for which the return needed to be filed. 

How to Pay TDS Online?

In order to make the TDS online, you will have to follow the below-mentioned steps:

  • Step 1: You need to go to the official website (https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp)
  • Step 2: Choose the kind of challan that is applicable.
  • Step 3: Form 26QC would open.
  • Step 4: Form 26QC would open up next.
  • Step 5: You will have to fill in the details in order to make the payment, and it would be the last step to follow.
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