TDS u/s 194IB: New Rent Deduction Rate Explained

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This discussion clarifies the TDS deduction rate under Section 194IB for rent payments exceeding £50,000 per month. While the rate was previously 5%, it has been reduced to 2% effective October 1, 2024. The key point is that the rate applies to the rent of a particular month, not the month of deduction. Therefore, for payments made after October 1, 2024, the 2% rate should be used, even if the deduction occurs in a later financial year, to avoid potential short deduction notices.

H Thakar

H Thakar (Querist)
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24 February 2025 The section says that the tax shall be deducted if the rent paid or payable exceeds Rs. 50,000 per month or part of the month either in last month of tenancy or of previous year.
However earlier it was 5% & w.e.f. October 1, 2024 the same is reduced to 2%.
My contract period is from April 24 to March 25 & i will be deducting the same @ 2% (New Rate). just wanted to confirm regarding the applicability of rate i.e. 2%

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 February 2025 This amendment takes effect from 1st October, 2024. So till September month the rate remains 5%.

H Thakar

H Thakar (Querist)
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24 February 2025 Noted. but I normally deduct in last month of Financial Year. so according to me it should be 2%

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 February 2025 The effective rates are for 'the rent of particular month' and not when it gets deducted.

H Thakar

H Thakar (Querist)
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25 February 2025 Understood & Still in doubt.
I have contract from April 24 to March 25 & deduction will take place in the month of March 25 i.e date/month of Payment. Here which rate should be taken 5% OR 2%

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 February 2025 If you deduct at 2% rate, there may be notice for short deduction of tax.

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