Section 194-IB of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on rent payments exceeding ₹50,000/month by individuals or HUFs who are not liable for tax audits under Section 44AB. Below is a detailed breakdown of its provisions, compliance requirements, and recent updates:
1. Applicability of Section 194-IB
✅ Who Must Deduct TDS?
- Resident individualsor HUFs paying rent for:
- Residential/commercial buildings.
- Land, machinery, furniture, or equipment.
- Excluded:
- Tax-audited entities (covered under Section 194-I).
- Rent ≤ ₹50,000/month.
✅ Threshold:
- Monthly rent > ₹50,000(even for partial months).
- No annual aggregation(unlike Section 194-I’s ₹2.4L/year limit).
2. TDS Rate & Deduction Rules
| PARAMETER | DETAILS |
| Rate (PAN Provided) | 2% (reduced from 5% post-October 2024). |
| Rate (PAN Not Provided) | 20% (under Section 206AA) . |
| Timing | Deduct at the earlier of: |
- Last month’s rent credit (if occupancy spans the financial year).
- Last month of tenancy (if vacated mid-year). |
Example:
- Rent: ₹60,000/month (PAN provided).
- TDS (2%): ₹1,200/month (or ₹14,400 annually).
3. Compliance Requirements
- Tenant’s Responsibilities
- Deduct TDS: At the time of payment/credit (whichever is earlier).
- Deposit TDS: Via Form 26QCwithin 30 days of deduction.
- Issue Form 16C: To the landlord within 15 daysof filing Form 26QC.
- Key Exemptions
- No TAN Required: Tenants can use their PANfor TDS filing.
- Government Payments: TDS must be deposited same day(no Form 26QC).
4. Penalties for Non-Compliance
| DEFAULT | CONSEQUENCE |
| Late Deduction | Interest @ 1% per month. |
| Late Payment | Interest @ 1.5% per month. |
| Non-Filing (Form 26QC) | Penalty of ₹200/day (max: TDS amount). |
5. Key Changes (Budget 2024)
- Rate Reduction: From 5% → 2%(effective October 1, 2024).
- Stricter Enforcement: Income Tax Department issues noticesfor non-compliance.
Example Scenarios
Case 1: Full-Year Tenancy
- Rent: ₹55,000/month (April 2025–March 2026).
- TDS (2%): Deduct ₹11,000in March 2026 (₹55,000 × 2% × 10 months).
Case 2: Mid-Year Vacating
- Rent: ₹70,000/month (July 2025–December 2025).
- TDS (2%): Deduct ₹8,400in December 2025 (₹70,000 × 2% × 6 months).
6. Key Takeaways
🔹 2% TDS on rent > ₹50K/month (post-October 2024).
🔹 PAN Mandatory to avoid 20% deduction.
🔹 No TAN Needed: Simplifies compliance for individuals/HUFs.
🔹 Form 26QC: File within 30 days of deduction.
