Section 194IB (TDS on Rent of Immovable Property) FY: 2024-25

Section 194IB TDS on Rent of Immovable Property of Income Tax Act 1961 provides the provisions related to deduction of TDS on rent payment by Individuals or HUF for the use of land or building or both.

This section not covered that individuals or HUF which is covered under section 194I (i.e. who is required to get audit compulsory u/s 44AB)

Let’s understand in detail the requirement of section 194IB.

 

What is section 194IB TDS on Rent of Immovable Property?

As per the section 194IB TDS on rent of immovable property any person being an individual or HUF (which is not covered under section 194I i.e. who is required to get audit compulsory under section 44AB) and who is responsible to pay rent to a resident for the use of any land or building or both, has to deduct TDS while making the payment.

Meaning of Rent for this section is any payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.

 

What is the threshold limit for TDS on Rent under section 194IB?

There is no need to deduct TDS on rent under section 194ib by Individual or HUF where the rent amount does not exceed Rs. 50,000 for a month or part of a month during the previous year.

TDS is to be deducted on full rent.

Example:

Mr. A pay rent to Mr. B 60,000 per month then TDS under sec 194ib to be deducted on 60,000 not on excess amount Rs.10,000 (60000-50000).

Also Read: TDS on Rent | Under Section 194I of Income Tax Act 1961

 

When to deduct TDS on Rent u/s 194IB?

TDS to be deducted by Individual or HUF on rent payment to resident

• At the time of credit of rent, for the last month of the previous year or last month of the tenancy, if the property is vacated during the year, as the case may be, to the account of the payee OR
• At the time of making payment through cash, by issue of cheque or draft or by any other mode.

whichever is earlier.

Example for understanding Point (1) above

Suppose Mr. A pay rent of Rs. 60,000 per month to Mr. B for the year 2023-24 then TDS on Rent under sec 194ib to be deduct for the last month of the previous year i.e. TDS deducted from rent payable for Mar 2024. In this case TDS to be deducted on Rs. 7,20,000 (Rs. 60000*12 months) from the rent payable for Mar 2024.

Also Read: TDS on Purchase of Immovable Property (Section 194IA)

 

What is the rate of TDS under section 194IB for FY2024-25?

The rate of TDS under section 194IB is 5% (1st April 2024 to 30 September 2024 and 2% (from 1st October'2024).

For deducting TDS under this section there is no requirement of TAN.

If PAN is not quoted by deductee then TDS is to be deducted at the rate of 20%.

In case TDS deducted at 20% then the deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

Example:

Mr. A pays rent of Rs.60,000 per month to Mr. B for the year 2023-24. Compute TDS u/s 194IB in the following cases:

1) PAN is quoted by Mr. B

2) PAN is not quoted by Mr. B

Sol:

1) PAN is quoted by Mr. B

TDS to be deducted as the amount exceeds Rs.50000 p.m.

TDS = Rs.36,000 ( 60000*5%*12 months)

[This TDS to be deducted from rent payable upto March 2024]

 

2) PAN is not quoted by Mr. B

TDS = Rs.1,44,000 (60000*20%*12 months) but the same is restricted to Rs.60,000 being rented upto March 2024.

 

In the same example, suppose Mr. A vacated the house on 31st Dec’ 2023.

1) PAN is quoted by Mr. B

TDS = Rs. 27000 (60000*5%*9 months)

[TDS to be deducted from rent payable upto December 2023)

 

2) PAN is not quoted by Mr. B

TDS = 1,08,000 (60000*20%*9 months) but the same is restricted to Rs.60,000 being rented upto December 2023.

Also Read: Section 271AAD: (Penalty for Fake Invoices / False Entry)

 

Conclusion

Section 194IB TDS on Rent of Immovable Property provides the information related to deduction of TDS on Rent u/s 194IB at the rate 5% (from 1st April'2024 to 30th September'2024 and 2% (from 1st October'2024) on limit above Rs. 50000 p.m. on payment by Individuals or HUF for the use of land or building or both.