Finance Act, 2017 has introduced few changes to TDS (‘Tax Deducted at Source’)/TCS (‘Tax Collected at Source’) provisions ranging from introduction of new sections, rate changes and extension of concessional rate TDS. This article summaries the changes which are applicable w.e.f 01-04-2017/01-06-2017.
Section 194IB: – The Section provides that an Individual or HUF, other than one covered by Section 194-I1 , responsible for paying to resident any income by way of rent exceeding Rs. 50,000/- per month or part of the month thereof after 01-06-2017 would be required to deduct tax @5%.
The tax is to be deducted at the time of credit of rent for the last month of previous year or last month of tenancy, if the property is vacated before the end of the previous year, to the account of the payee or at the time of payment, by cash, cheque or draft, whichever is earlier.
In short, TDS should be deducted earliest of credit or payment of rent to the payee. Payer is not required to obtain TAN for complying this section.
‘Rent’ for this section means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other arrangement or agreement for the use of any land or building or both.
FAQ: –
1) whether Rent for agricultural land is also covered?
Ans: – Going by the definition of the term ‘Rent’ it has not provided any exception to the agricultural land. However, rent from agricultural land is exempted from tax U/S 10(1). If the payment is not income, TDS provisions are not applicable.
- If the rent for few months is less than Rs. 50,000/- and for few months is more than Rs. 50,000/-, is TDS is required to be deducted for the aggregate rent?
Ans: – TDS U/S 194IB is required to be deducted only if the rent per month or part of the month exceeding Rs. 50,000/-.so, TDS is required to be deducted from the month rent is more than Rs. 50,000/-
3) Whether the section is applicable if the Payer is Non-resident? Ans: – Yes. Section is applicable even if the individual paying rent is Non-resident.
- Whether the section is applicable if the Payee is Non-resident? Ans: – No. Section is applicable only if the Payee is Resident.
1Who is subject to Audit U/S 44AB in the preceding financial year.
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5) If the owner doesn’t provide his PAN, whether provisions of section 206AA are applicable?
Ans: – Yes. However, the deduction shall not exceed the amount of rent payable for the last month or last month of tenancy. Ex: – If monthly rent is Rs. 55,000/- and the payee has not provided his PAN the TDS amount would be @20% (Sec 206AA) is Rs. 132000/- (Rs. 55,000*12= Rs. 6,60,000/- TDS @20% is Rs. 1,32,000). However, the TDS should not exceed Rs. 55,000/-.
- Is Certificate for lower or nil rate of deduction be obtained U/S 197? Ans: – No.
Section 194J: – The rate of TDS would be @2% in case of the payee engaged only in the business of operation of call centers. (w.e.f 01/06/2017)
Section 194-IC: – Any person responsible for paying to resident payee, being individual or HUF with whom any specified agreement is entered, any sum by way of monetary consideration under specified agreement (Joint Development Agreement) referred to in section 45(5A) shall deduct tax @10%. (w.e.f 01/04/2017)
The tax is to be deducted at the time of credit of such sum to the credit of account of payee or at the time of payment, whichever is earlier.
FAQ: –
- Whether TDS is required to be deducted if the payment is less than 50,00,000/-? Ans: – TDS is required to be deducted irrespective any amount.
- In which year TDS credit can be adjusted?
Ans: – TDS credit can be utilized in the year in which the capital gain is chargeable to tax U/S 45(5A)
3) Is advance payment before execution of the agreement is subject to TDS?
Ans: – The agreement referred to in section 45(5A) should be registered to treat it as specified agreement. So, no TDS is required at the time of payment of advance before registration of agreement. However, TDS is required to be deducted when the agreement is registered or advance is adjusted. (Grossing may apply)
- Is Certificate for lower or nil rate of deduction be obtained U/S 197? Ans: – No.
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TDS/TCS- Changes Brought in by FA 2017 |
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Other Changes: – |
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Section |
Change |
w.e.f. |
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Concessional rate of TDS @5% is available in relation to |
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interest payment in respect of borrowings made on or after |
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01/10/2014 but before 01/07/2020 |
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194LC |
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01/04/2017 |
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Interest in respect of monies borrowed from a source |
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outside India by way of issue of rupee denominated bond |
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before 01/07/2020 |
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194LD |
Concessional rate of TDS @5% is available in relation to |
01/04/2017 |
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interest payment to FII/Qualified Foreign Investors payable |
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on or after 01/06/2013 but before 01/07/2020 in respect of |
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investment in rupee denominated bonds of Indian Company |
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or Government Security. |
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194D |
Self -declaration by Individual or HUF for non- deduction of |
01/06/2017 |
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TDS in form 15G/15H |
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40(a)(ia) |
Disallowance for non-deduction of TDS from payment to |
01/04/2017 |
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Residents applicable to Income under the Head “Income |
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from Other Sources” |
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206CC |
Failure to furnish PAN to the person responsible for |
01/04/2017 |
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Collecting Tax at Source will attract TCS @twice the |
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applicable rate or 5%, whichever is higher. |
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