[Section 194-IB]: TDS on Rent Payments by Individuals/HUFs

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

• 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

1. Tenant’s Responsibilities
2. Deduct TDS: At the time of payment/credit (whichever is earlier).
3. Deposit TDS: Via Form 26QCwithin 30 days of deduction.
4. Issue Form 16C: To the landlord within 15 daysof filing Form 26QC.
5. 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

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.