TDS on Rent Payments ReducedTDS on Rent Payments Reduced In a move to ease the financial burden on tenants and simplify tax compliance, Finance Minister Nirmala Sitharaman has announced a reduction in Tax Deducted at Source (TDS) on rent payments. Effective October 1, 2024, the TDS rate will decrease from 5% to 2% for monthly rent payments exceeding ₹50,000. This amendment aims to make tax compliance more taxpayer-friendly. Under the existing provisions of Section 194-IB of the Income Tax Act, tenants paying monthly rent of ₹50,000 or more are required to deduct 5% of the rental income as TDS and deposit it with the government. The new amendment will reduce the TDS rate to 2%, effectively lowering the amount of tax deducted from tenants’ rent payments. This will provide financial relief to tenants, particularly those with higher rental obligations. The amendment is expected to come into effect from October 1, 2024, and will apply to all individuals and undivided Hindu families (except those exempted under the Act). It is a welcome step towards reducing the tax burden on tenants and promoting a more taxpayer-centric approach.
Finance Minister Nirmala Sitharaman on Tuesday (July 23) announced a reduction in Tax Deducted at Source (TDS) on rent payments. Effective October 1, 2024, the TDS rate will come down from 5% to 2% for monthly rent payments of more than ₹50,000.
“As per the provisions of Section 194-IB, every person, being an individual or an undivided Hindu family (except those mentioned in the second proviso to Section 194-I), who is liable to pay to any resident income by way of rent exceeding fifty thousand rupees for any month or part thereof during the preceding year, shall deduct as income-tax an amount equal to 5% of such income.”
“It is proposed to reduce the TDS under Section 194-IB of the Act from 5% to 2%. 3. The amendment will come into effect from October 1, 2024,” the budget memorandum said.
Notably, tenants paying a monthly rent of ₹50,000 or more are required to deduct 5% of the rental income as TDS, as per Section 194IB of the Income Tax Act, 1961.
This provision states that TDS should be deducted at the end of the financial year, before the monthly rent payments, or when the lease agreement is terminated, whichever is earlier.
The tenant has to deposit the deducted TDS amount within 30 days from the end of the month in which the tax was deducted. The new amendment is aimed at easing the financial burden on tenants by reducing the TDS rate, simplifying tax compliance and ensuring a more taxpayer-friendly approach.
