Budget 2024: Rate of TDS on house rent payment of more than Rs 50,000 per month cut to 2% from 5%

Now you will have to deduct a lower amount of tax from house rental payments exceeding Rs 50,000 for a month or part of a month. Union Budget 2024 has reduced the rate of tax deducted at source (TDS) from 5% to 2% from house rent payments exceeding Rs 50,000“As per provisions of section 194-IB, any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to 5% of such income as income-tax thereon. It is proposed that TDS under section 194-IB of the Act be reduced from 5% to 2%. The amendment will take effect from 1st day of October 2024,” as per the memorandum to Budget 2024.

If your monthly house rent payment is Rs 50,000 or more, then you are liable to deduct tax deducted at source (TDS) at a specified rate from rental payment

Here is a look at when to deduct TDS from house rent payment and how to deposit

Who should deduct TDS?

A tenant must deduct TDS from their house rent if the rental amount is Rs 50,000 or more for a month or part of it.

What is the rate of TDS?

Section 194IB of the Income Tax Act, 1961 has fixed the TDS on house rent at 5%. Suppose tenant is paying a yearly rent of Rs 6,12,000 (Rs 51,000 monthly), then he will deduct a TDS at 5%, i.e., Rs 30,600 (Rs 6,12,000*5%).It may happen that the landlord is not sharing his PAN number or his PAN has become inoperative. In such cases, the tenant will deduct TDS at a higher rate of 20% under Section 206AA of the Income Tax, 1961.If the PAN of the landlord is inoperative, he/she will not get credit for this TDS while filing income tax returns.

When will a tenant deduct TDS on house rent?

The TDS on house rent must be deducted either at the end of a particular financial year, before making monthly rent payment, the date on which the property is vacated or the rent agreement is terminated with the landlord, whichever is earlier.

Example 1: If a tenant has a rent agreement with a landlord of 11 months from September 2023 to July 2024, then the tenant can either deduct TDS on a monthly basis and deposit the same every month or deduct once from the March’s rental payment. The TDS will be deducted for the rent paid i.e. from September to March 2023.

Example 2: If the tenant is vacating the property in August 2023, then he will be required to deduct TDS before paying rent. Here rent will be deducted from April to August 2023 for 5 months.

Now you will have to deduct a lower amount of tax from house rental payments exceeding Rs 50,000 for a month or part of a month. Union Budget 2024 has reduced the rate of tax deducted at source (TDS) from 5% to 2% from house rent payments exceeding Rs 50,000“As per provisions of section 194-IB, any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to 5% of such income as income-tax thereon. It is proposed that TDS under section 194-IB of the Act be reduced from 5% to 2%. The amendment will take effect from 1st day of October 2024,” as per the memorandum to Budget 2024.

If your monthly house rent payment is Rs 50,000 or more, then you are liable to deduct tax deducted at source (TDS) at a specified rate from rental payment

Here is a look at when to deduct TDS from house rent payment and how to deposit

Who should deduct TDS?

A tenant must deduct TDS from their house rent if the rental amount is Rs 50,000 or more for a month or part of it.

What is the rate of TDS?

Section 194IB of the Income Tax Act, 1961 has fixed the TDS on house rent at 5%. Suppose tenant is paying a yearly rent of Rs 6,12,000 (Rs 51,000 monthly), then he will deduct a TDS at 5%, i.e., Rs 30,600 (Rs 6,12,000*5%).It may happen that the landlord is not sharing his PAN number or his PAN has become inoperative. In such cases, the tenant will deduct TDS at a higher rate of 20% under Section 206AA of the Income Tax, 1961.If the PAN of the landlord is inoperative, he/she will not get credit for this TDS while filing income tax returns.

When will a tenant deduct TDS on house rent?

The TDS on house rent must be deducted either at the end of a particular financial year, before making monthly rent payment, the date on which the property is vacated or the rent agreement is terminated with the landlord, whichever is earlier.

Example 1: If a tenant has a rent agreement with a landlord of 11 months from September 2023 to July 2024, then the tenant can either deduct TDS on a monthly basis and deposit the same every month or deduct once from the March’s rental payment. The TDS will be deducted for the rent paid i.e. from September to March 2023.

Example 2: If the tenant is vacating the property in August 2023, then he will be required to deduct TDS before paying rent. Here rent will be deducted from April to August 2023 for 5 months.