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Any Person liable to pay rent for more than 50000 per month are to deduct TDS @ 5%

Section Description Cutoff Rate of TDS
194-IB Rent Paid  50000 PM 5%

 

Hence,even Salaried Person paying Rent more than 50000 per month and claiming HRA has to deduct and pay TDS of the landlord

 

 


Changes in 194-IB Due to Lockdown

However,Due to Lockdown,Government has temporarily reduced Rate by 25%

hence,TDS Rate on Personal Rent is Changed as follows

  Current Rate New Rate (Temporary)
TDS on Personal Rent Paid 5% 5%*75%=3.75%

 

Note - This New Rate is Temporary only if TDS Deducted form 14 May 2020 to 31 Mar 2021

After this old Rate will be applicable

 

This TDS is to be deducted

Annually in last month (March)

or

last month of Rent Agreement.

 

Example 1

Suppose a person pays rent of 40000 per month to Landlord

Whether TDS to be deducted

View Answer

Example 2

Suppose a person pays rent of 100000 per month to Landlord

Whether TDS to be deducted

View Answer

 

 Example 3

Person Stays in Rented House from April-July @ 100000 per month

Whether TDS to be deducted

View Answer

 

Note:-
This section is not applicable to those Rent which are covered under Section 194I

 

 

Difference between Section 194I and Section 194 - IB

 

 SECTION 194I SECTION 194IB

It is applicable for those business who in last year liable to tax audit

Example

Company

Proprietorship/Partnership having turnover > 2 cr in 2016-17

It is applicable in all other cases like

Small Business not liable to tax audit

Personal Rent of House for Salaried Individual

TDS Rate is 10% TDS Rate is 5%
Cut off is 240000 Per annum Cut off is 50000 Per Month
TDS is to be deducted Monthly TDS is to be deducted Annually in last month (March) or last month of Rent Agreement.
TAN No. Required to Deduct TDS  No Tan No. Required, Simple Pan No. Sufficient

 

Implication of Section 194-IB on Payroll and HRA

  • Many Employees who are claiming HRA through fake Rent Receipts
  • Those employees who are showing Rent receipts of more than 50000 p.m have now to deduct 5% TDS
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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.