Section 194-IB – TDS on Rent Paid by Individuals or HUFs

Overview of Section 194-IB – TDS on Rent Paid by Individuals or HUFs

Applicability of Section 194-IB 

Any individual or Hindu Undivided Family (HUF) (not covered under tax audit under Section 44AB) who pays monthly rent exceeding ₹50,000 is required to deduct TDS @ 5% under Section 194-IB.

Definition of “Rent” Under 194-IB : “Rent” includes any payment under lease, sub-lease, tenancy, or agreement for the use of land, building, or both (excluding plant/machinery/furniture).

Paying monthly rent > INR 50,000 in FY 2024–25? You’re mandated to deduct and deposit TDS under Section 194-IB of the Income Tax Act, 1961

Latest Update – Budget 2024

From October 1, 2024, the TDS rate under Section 194-IB has been reduced from 5% to 2% for qualifying individuals and HUFs.

• Rate before 30.09.2024: 5%
• Rate from 01.10.2024 onward: 2%
• Note: 3.75% was applicable for a temporary period (14.05.2020–31.03.2021)

Form 26QC Deadline: 30th April 2025 (for full FY)

TDS Rates:

▪️ 5% – For rent paid between 01.04.2024 to 30.09.2024

▪️ 2% – For rent paid from 01.10.2024 onwards (Budget 2024 change)

Key Features of Section 194-IB- TDS on Rent Paid by Individuals or HUFs

1. Who Should Deduct TDS?
   • Individuals/HUFs not liable to tax audit under Section 44AB, i.e., turnover:
     • Less than ₹1 crore (business)
     • Less than ₹50 lakh (profession)
   • Covered even if they are under presumptive taxation schemes (Sections 44AD, 44AE).
2. When to Deduct TDS?
   TDS must be deducted at the earlier of:
   • Time of credit of rent for the last month of the financial year or tenancy period
   • Time of actual payment (cash, cheque, or electronic)
3. TAN Not Required:
   • Deduction under 194-IB does not require obtaining TAN (Section 203A not applicable).
   • Only PAN of the deductor and landlord is needed.
4. Maximum Deductible TDS:
   Under Section 206AA, if the landlord does not provide PAN, TDS @ 20% applies.
   However, deduction should not exceed the rent amount of the last month of the tenancy/financial year.

Compliance Requirements TDS on Rent Paid by Individuals or HUFs

• Form 26QC:
  • Challan-cum-statement to be filed within 30 days from the end of the month in which rent is paid/due.
• Form 16C:
  • TDS certificate to be issued by the tenant to the landlord within 15 days from the due date of Form 26QC filing.
• TAN not required – Only PAN-based remittance is sufficient and Applicable irrespective of the tax regime (old/new)

Consequences of Non-Compliance of TDS on Rent Paid by Individuals or HUFs

• Interest @ 1% per month – Section 201(1A)
• Late filing fee @ ₹200/day – Section 234E (max: TDS amount)
• Penalty up to TDS amount – Section 271H
• Possible Scrutiny/Notices from Income Tax Department

Don’t miss this! Deduct, deposit, and file on time to stay compliant.