What is Section 194IB?
- A rule in India’s Income Tax Act that applies when an individual or HUF pays rent exceeding ₹50,000 per month to a resident landlord
- Introduced in June 2017 to bring big rent payments under the tax system.
Who must deduct TDS?
- Tenant must be an individual or HUF.
- Tenant should not need a tax audit (under Section 44AB)
- Rent should be ₹50,000 or more per month
What counts as “rent”?
- Any payment under lease, tenancy, or use of land, building, or both .
How much TDS must be deducted?
- 5% of rent if landlord provides PAN;
- If PAN not given, then 20%.
- Important update: From October 1, 2024, the rate changed to 2% (20% if PAN missing) .
When to deduct?
- In the last month of tenancy (if moving out during year),
OR - In March, if tenant stays throughout the year—i.e., the last month of the financial year—at the earlier of rent credit or payment .
How and by when to file?
- Pay TDS and file Form 26QC (challan-cum-statement) within 30 days after month-end.
- Issue Form 16C (TDS certificate) to landlord within 15 days after filing 26QC.
- Tenant does not need a TAN, only PAN of both parties is needed .
Example:
- Suppose rent is ₹60,000/month from April–March.
- Tenant deducts 5% (₹3,000/month) → ₹36,000 total in March (or 2% if after Oct 2024: ₹14,400).
- If moving out in November, deduct in November .
What if TDS isn’t done?
- Late deduction: 1% per month interest.
- Late deposit: 1.5% per month.
- Late filing: ₹200 per day (capped) penalty.
- Potential penalty under Section 271C.
Key Points
- Only applies to individuals/HUFs, not audited entities.
- Applies if rent > ₹50,000/month.
- TDS at 5%, now 2% from Oct 2024, or 20% without PAN.
- Deduction timing: last month rent, either of tenancy or year.
- Compliance: Form 26QC → Form 16C, no TAN needed.
- Late compliance leads to interest and penalties.
Section 194IB was made simple for tenants with high rent. A one-time annual TDS cut avoids monthly hassle.
