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
No TDS to be deducted as monthly rent is more than 50000
Example 2
Suppose a person pays rent of 100000 per month to Landlord
Whether TDS to be deducted
View answer
Since this amount is more than 50000,TDS 194IB is applicable
TDS will be deducted annually (only one time in a year)
Rent Paid Annually=100000*12=1200000
TDS =5%*12000000=60000
Rent Paid in March will be 100000-60000=40000
(in all other months whole 100000 will be paid)
Example 3
Person Stays in Rented House from April-July @ 100000 per month
Whether TDS to be deducted
View answer
TDS will be deducted at the time of last month of rent agreement i.e July
Rent Paid Annually=100000*4=400000
TDS =5%*400000=20000
Rent Paid in July will be 100000-20000=80000
(in all other months whole 100000 will be paid)
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