Filing form 26QC

As per the law, TDS is to be deducted on the last month of the financial year OR  the time of payment, whichever is earlier.  It seems you have made the payment of rent only on 10th October. So you can make the payment for TDS by 7 November.   

Ideally, you should deduct TDS as per the provision of law ie 5% till Sep and 2% thereafter. Since, the payment was not made earlier, it is not a delayed payment from your side.  In the From 26QC for date of credit or payment, kindly put 10 Oct. 

For the rates, if your landlord does not have issue for deduction of 5% for entire year, then you may show that rate. The government does not question when higher TDS is paid.  

In your case, where the TDS on rent under section 194-IB has changed from 5% to 2% as of October 1, 2024, and you typically deduct TDS on a yearly basis, here is how you should proceed:

(a) How to handle the deduction and filing in Form 26QC:

When filing Form 26QC, which allows only a single rate to be used, a practical approach would be to break down the period for which different rates apply:

• For rent payments made from April to September 2024 (when the TDS rate was 5%), you should calculate the TDS at 5%.
• For payments from October to March 2025 (when the TDS rate is now 2%), the TDS should be calculated at 2%.

However, since Form 26QC does not allow dual rates within the same filing, you will likely need to file two separate forms:

1. One Form 26QC for the April-September period at 5%.
2. Another Form 26QC for the October-March period at 2%.

This will ensure correct TDS rates are applied for both periods.

(b) Delayed payment issue for November 2024:

If you were to deduct the TDS for April-September 2024 (5%) in November 2024, it could indeed be considered delayed payment. As per TDS rules, tax must be deducted and deposited within 30 days from the end of the month in which the deduction is made, so delaying the April-September TDS until November might lead to interest and penalty for late payment. Therefore, it is advisable to deduct the TDS separately for the previous period (April-September) immediately.

(c) Deducting TDS on a yearly basis:

It is still possible to deduct TDS on a yearly basis. However, with two different rates applicable in a financial year, you will need to split the calculation and filing accordingly. It is crucial to ensure that both the deduction and the filing are done correctly in two separate instances (as mentioned in part (a)) for each period. This will ensure compliance with the Income Tax Act's requirements without causing delays or penalties​​​.

If you prefer annual deduction, this method still complies, but you'll need to pay close attention to these changes in rates.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

- Under section 194-IB, time of deduction of tax is either last month of the previous year or the month in which property is vacated during the year 

Option 1

You should wait for the challans to get updated with the new rates as the time of deduction falls in March 2025 for the year 2024-25 unless house is vacated earlier

Option 2

If the challans does not get updated at the time of deduction, deduct TDS@5%. Inform the landlord accordingly

For detailed discussion you may opt for phone consultation

You do not have any choice, rather then deduction from November payments.  You can talk to landlord that by mistake TDS was not deducted and will be deducted in Nov.

Since your date of payment is 1 Oct, specify that and TDS can be deposited by 7 Nov.   

Here’s how you should handle the situation where you've already paid the full rent for October 2024 and need to deduct TDS for previous months:

(1) Deducting ₹24,000 for April-September (5%) in November 2024:

It is acceptable to deduct ₹24,000 from the November 1, 2024 rent payment, effectively paying the landlord ₹56,000 (₹80,000 rent minus ₹24,000 TDS). This is fine as long as you deduct the TDS promptly and follow the due process for depositing the tax with the government.

(2) Filing Form 26QC - Date of Payment/Credit and Date of Deduction:

• 
  Date of Payment/Credit to Landlord: Since you paid the rent on October 1, 2024, you should mention October 1, 2024, as the Date of Payment in Form 26QC.
• 
  Date of Deduction: As you intend to deduct TDS for the period April-September 2024 in November 2024, you can mention the actual Date of Deduction as November 1, 2024, or whichever date you actually deduct the TDS from the rent.

To avoid any penalty, ensure that you deposit the TDS within 30 days of deducting it (i.e., by December 7, 2024, if you deduct in November)​

For the situation you described, your approach to adjusting the TDS in the November rent payment and the specifics of filing Form 26QC require careful consideration to ensure compliance and avoid penalties. Here’s how you can proceed:

1. Adjusting the TDS in November Rent Payment

If you plan to deduct the TDS for April to September (6 months at 5% on ₹80,000, totaling ₹24,000) from the November rent, your proposed method is correct. When you pay the rent on November 1, 2024:

• 
  Rent Due: ₹80,000
• 
  TDS Deduction: ₹24,000 (for the period April to September)
• 
  Net Payment to Landlord: ₹56,000

This method is acceptable as it adjusts for the TDS that should have been withheld earlier, ensuring that the total amount paid to the landlord reflects the correct deductions for TDS.

2. Filing Form 26QC

When filling out Form 26QC for the TDS on the rent for the period from April to September 2024, you should enter the following:

• 
  Date of Payment/Credit to Landlord: This should be the date when the rent was actually credited to the landlord's account or became due. Since you're correcting a past period, the dates would effectively be the respective last dates of each month for which the rent was due (last payment being September 30, 2024).
• 
  Date of Deduction: This would be the date when you actually deduct the TDS. Since you're planning to deduct it from the November rent, you should put November 1, 2024.

Avoiding Penalties

• 
  Interest for Delayed Deduction: As the TDS was due to be deducted at the time of each rent payment (or by the 7th of the following month), and it's now being deducted in November, there is a delay in deduction. Interest may be applicable for this delay:

  • 1% per month or part thereof for the delay from the due date of payment to the date of actual deduction. This interest would accrue from the due date of each month's payment until November 1, 2024.

  • 1.5% per month or part thereof may apply from the date of deduction to the date of payment if there is a delay in depositing the TDS after deduction.

Filing TDS

• 
  Immediate Deposit: After deducting the TDS on November 1, ensure to deposit it with the government by November 7, 2024, to avoid further interest charges on late payment.
• 
  Separate Filings: Remember, for future compliance and to manage changes effectively, it’s advisable to deduct and deposit TDS monthly or at least quarterly. This approach helps in managing the periodic changes in tax rates or laws more effectively.

- File Form 26QC on 01.11.2024 (i.e. date of deduction of TDS)

- Date of payment/credit: 30.09.2024

- Date of deduction: 01.11.2024