I am an individual paying Rs 70,000 a month rent, and separately I have paid an interior contractor Rs 62 lakh for my own house. When exactly do I deduct, how much, and do I need a TAN?
Under section 194-IB you deduct once, not monthly: the tax is deducted at the time of credit of rent for the last month of the previous year, or the last month of the tenancy if you vacate during the year, or at the time of payment of that rent, whichever is earlier, and the rate is two per cent of the income by way of rent, substituted for five per cent with effect from 1 October 2024. Under section 194M you deduct two per cent, again substituted for five per cent from the same date, but only if you are not a person required to deduct under section 194C, 194H or 194J, and only if the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Neither section requires a TAN: section 194-IB(3) and section 194M(2) each disapply section 203A.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-10-01, reported as Income-tax Act, 1961, ss.194-IB and 194M, as they stand after the rate in each was reduced from five per cent to two per cent with effect from 1 October 2024. It bears on section 194-IB, section 194-IB(1), section 194-IB(2), section 194-IB(3), section 194-IB(4), section 194M, section 194M(1), section 194M(2), section 203A, section 206AA, section 206AB, section 194C, section 194H, section 194J, section 194-I, section 194D of the Income Tax Act 1961, in TDS Defaults and House Property matters.
These are the two provisions that make a private individual a deductor without his ever having filed a TDS return, and the machinery in them is unlike the rest of Chapter XVII-B. Section 194-IB deducts once a year, on the last month's rent, which means the entire year's tax is taken out of one month's payment; a tenant who pays the full rent every month and then discovers the obligation in March has nothing left to deduct from. That is what sub-section (4) is for — and it is narrower than it is usually described. It caps the deduction at the last month's rent ONLY 'in a case where the tax is required to be deducted as per the provisions of section 206AA', that is, where the landlord has furnished no PAN and the rate is therefore twenty per cent. It is not a general cap on the deduction. Its history is worth knowing because it moved twice: the words 'or section 206AB' were inserted in sub-section (4) with effect from 1 July 2021 and omitted again with effect from 1 April 2022, so a deduction in the intervening period fell under a differently worded cap. On section 194M the gateway is what keeps most people out and catches a few badly: it applies only to an individual or Hindu undivided family 'other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J' — so a proprietor whose accounts were audited in the preceding year is outside section 194M and inside the ordinary sections, at the ordinary rates and with a TAN. The fifty lakh rupee test is on the aggregate for the financial year to that resident, so a series of payments to the same contractor is added up.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 194-IB as printed on the Year 2026 departmental page: (1) 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 two per cent of such income as income-tax thereon; (2) the tax shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, to the account of the payee, or at the time of payment thereof by any mode, whichever is earlier; (3) section 203A shall not apply to a person required to deduct under this section; (4) in a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy; and the Explanation defines 'rent' as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both. Section 194M as printed on the Year 2026 departmental page: (1) any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J) responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services during the financial year, shall, at the time of credit of such sum or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to two per cent of such sum as income-tax thereon, with a proviso that no deduction shall be made if such sum, or the aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees; (2) section 203A shall not apply to a person required to deduct under this section; and the Explanation borrows the definitions of 'contract', 'commission or brokerage', 'professional services' and 'work' from sections 194C, 194H and 194J.
From 1 October 2024 the rate under each section is two per cent, substituted for five per cent. Under section 194-IB the deduction is made once, at the credit or payment of the last month's rent of the previous year or of the tenancy, on rent exceeding fifty thousand rupees for a month or part of a month; the cap in sub-section (4) limiting the deduction to the last month's rent operates only where tax is required to be deducted as per section 206AA. Under section 194M the deductor must be an individual or Hindu undivided family who is not required to deduct under section 194C, 194H or 194J, and no deduction is required unless the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Section 203A applies to neither, so neither deductor requires a tax deduction account number.
Not applicable — this is a statement of statutory text with the amendment footnotes printed on the same departmental pages. No judicial reasoning is involved.
(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.
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Handle my notice → Ask a CA on WhatsAppUnder section 194-IB you deduct once, not monthly: the tax is deducted at the time of credit of rent for the last month of the previous year, or the last month of the tenancy if you vacate during the year, or at the time of payment of that rent, whichever is earlier, and the rate is two per cent of the income by way of rent, substituted for five per cent with effect from 1 October 2024. Under section 194M you deduct two per cent, again substituted for five per cent from the same date, but only if you are not a person required to deduct under section 194C, 194H or 194J, and only if the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Neither section requires a TAN: section 194-IB(3) and section 194M(2) each disapply section 203A. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194-IB, section 194-IB(1), section 194-IB(2), section 194-IB(3), section 194-IB(4), section 194M, section 194M(1), section 194M(2), section 203A, section 206AA, section 206AB, section 194C, section 194H, section 194J, section 194-I, section 194D of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, ss.194-IB and 194M, as they stand after the rate in each was reduced from five per cent to two per cent with effect from 1 October 2024. These are the two provisions that make a private individual a deductor without his ever having filed a TDS return, and the machinery in them is unlike the rest of Chapter XVII-B. Section 194-IB deducts once a year, on the last month's rent, which means the entire year's tax is taken out of one month's payment; a tenant who pays the full rent every month and then discovers the obligation in March has nothing left to deduct from. That is what sub-section (4) is for — and it is narrower than it is usually described. It caps the deduction at the last month's rent ONLY 'in a case where the tax is required to be deducted as per the provisions of section 206AA', that is, where the landlord has furnished no PAN and the rate is therefore twenty per cent. It is not a general cap on the deduction. Its history is worth knowing because it moved twice: the words 'or section 206AB' were inserted in sub-section (4) with effect from 1 July 2021 and omitted again with effect from 1 April 2022, so a deduction in the intervening period fell under a differently worded cap. On section 194M the gateway is what keeps most people out and catches a few badly: it applies only to an individual or Hindu undivided family 'other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J' — so a proprietor whose accounts were audited in the preceding year is outside section 194M and inside the ordinary sections, at the ordinary rates and with a TAN. The fifty lakh rupee test is on the aggregate for the financial year to that resident, so a series of payments to the same contractor is added up. If it applies to you, the first step is this: For rent, first check the fifty thousand rupee test — the section applies to rent 'exceeding fifty thousand rupees for a month or part of a month during the previous year', so a single month over the figure brings the year into charge.
Section 194-IB as printed on the Year 2026 departmental page: (1) 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 two per cent of such income as income-tax thereon; (2) the tax shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, to the account of the payee, or at the time of payment thereof by any mode, whichever is earlier; (3) section 203A shall not apply to a person required to deduct under this section; (4) in a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy; and the Explanation defines 'rent' as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both. Section 194M as printed on the Year 2026 departmental page: (1) any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J) responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services during the financial year, shall, at the time of credit of such sum or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to two per cent of such sum as income-tax thereon, with a proviso that no deduction shall be made if such sum, or the aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees; (2) section 203A shall not apply to a person required to deduct under this section; and the Explanation borrows the definitions of 'contract', 'commission or brokerage', 'professional services' and 'work' from sections 194C, 194H and 194J. The matter was decided on 2024-10-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. From 1 October 2024 the rate under each section is two per cent, substituted for five per cent. Under section 194-IB the deduction is made once, at the credit or payment of the last month's rent of the previous year or of the tenancy, on rent exceeding fifty thousand rupees for a month or part of a month; the cap in sub-section (4) limiting the deduction to the last month's rent operates only where tax is required to be deducted as per section 206AA. Under section 194M the deductor must be an individual or Hindu undivided family who is not required to deduct under section 194C, 194H or 194J, and no deduction is required unless the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Section 203A applies to neither, so neither deductor requires a tax deduction account number.
Not applicable — this is a statement of statutory text with the amendment footnotes printed on the same departmental pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be."
It was decided by the CBDT Circulars & Instructions on 2024-10-01 and is reported as Income-tax Act, 1961, ss.194-IB and 194M, as they stand after the rate in each was reduced from five per cent to two per cent with effect from 1 October 2024. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194-IB, section 194-IB(1), section 194-IB(2), section 194-IB(3), section 194-IB(4), section 194M, section 194M(1), section 194M(2), section 203A, section 206AA, section 206AB, section 194C, section 194H, section 194J, section 194-I, section 194D, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. From 1 October 2024 the rate under each section is two per cent, substituted for five per cent. Under section 194-IB the deduction is made once, at the credit or payment of the last month's rent of the previous year or of the tenancy, on rent exceeding fifty thousand rupees for a month or part of a month; the cap in sub-section (4) limiting the deduction to the last month's rent operates only where tax is required to be deducted as per section 206AA. Under section 194M the deductor must be an individual or Hindu undivided family who is not required to deduct under section 194C, 194H or 194J, and no deduction is required unless the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Section 203A applies to neither, so neither deductor requires a tax deduction account number. It arises in TDS Defaults and House Property matters, on section 194-IB, section 194-IB(1), section 194-IB(2), section 194-IB(3), section 194-IB(4), section 194M, section 194M(1), section 194M(2), section 203A, section 206AA, section 206AB, section 194C, section 194H, section 194J, section 194-I, section 194D of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Deduct the whole year's tax once, at the credit or payment of the last month's rent of the previous year, or of the last month of the tenancy if you vacate earlier. Do not deduct monthly. Get the landlord's PAN before the last month. Without it section 206AA applies at twenty per cent, and sub-section (4) then caps the deduction at one month's rent — which leaves the tenant carrying the shortfall as a deductor. Do not read sub-section (4) as a general cap. Outside a section 206AA case it does not apply, and a two per cent deduction on a year's rent is well within one month's rent anyway. For a contract, commission or professional payment, ask the gateway question first: were you required to deduct under section 194C, 194H or 194J for that year? If you were, section 194M does not apply to you at all and the ordinary sections do. Aggregate all payments to the same resident during the financial year before deciding that fifty lakh rupees has not been crossed. Do not apply for a TAN for either section — section 194-IB(3) and section 194M(2) disapply section 203A. The departmental pages record Forms 16C, 26QC and 27A for section 194-IB and Forms 16D, 26QD and 27A for section 194M. Apply the correct rate to the correct date: two per cent for a credit or payment on or after 1 October 2024, five per cent before it, under both sections.
Still good law. The two per cent rate for section 194-IB is corroborated on two departmental pages that footnote it to the same Act and the same date: https://incometaxindia.gov.in/w/section-194-ib-2 (Year: 2026), footnote 42, 'Sub. for "five" by Act No. 15 of 2024, w.e.f. 1-10-2024', and https://incometaxindia.gov.in/w/section-194ib-6 (Year: 2024 (No. 2)), footnote 97, 'Sub. for "five" by the Act No. 15 of 2024, w.e.f. 1-10-2024'. The identical change to section 194M is corroborated on two current pages, https://incometaxindia.gov.in/w/section-194m-8 (Year: 2026), footnote 47, and /w/section-194m-7 (Year: 2025), footnote 97-98, in the same terms. Every other page for either section reachable this pass is stamped 2024 (No. 1) or earlier and prints five per cent, which is the correct negative control. The gateway, the thresholds, the once-a-year timing rule, the section 206AA cap and the section 203A disapplications are printed identically across every version read. No Finance Act text was retrieved and no citator check was run, so a later amendment cannot be excluded and the Act is recorded by its number as the department prints it, not by a popular name. Anything applying five per cent under either section to a credit or payment on or after 1 October 2024 is superseded by amendment; and any statement that section 194-IB(4) caps the deduction generally, rather than only in a section 206AA case, is wrong on the text as printed. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Sources and 'Year:' stamps, all pages headed 'Income-tax Act, 1961'. Section 194-IB, heading 'Payment of rent by certain individuals or Hindu undivided family': current text from https://incometaxindia.gov.in/w/section-194-ib-2 (Year: 2026), which prints two per cent and carries footnote 42, 'Sub. for "five" by Act No. 15 of 2024, w.e.f. 1-10-2024'. The two per cent rate is corroborated on a second departmental page, https://incometaxindia.gov.in/w/section-194ib-6 (Year: 2024 (No. 2)), which prints sub-section (1) with 'two per cent' and carries footnote 97, 'Sub. for "five" by the Act No. 15 of 2024, w.e.f. 1-10-2024', and footnote 98, 'Words "or section 206AB" omtt. by the Act No. 6 of 2022, w.e.f. 1-4-2022'. The negative control is complete: every other departmental page for section 194-IB reachable — /w/section-194ib (Year: 2017), /w/section-194ib-2 (Year: 2019 (No. 2)), /w/section-194ib-7 (Year: 2018), /w/section-194ib-8 (Year: 2019 (No. 1)), /w/section-194ib-3 (Year: 2022), /w/section-194ib-5 (Year: 2024 (No. 1)) and /w/section-194-ib (Year: 2021) — prints five per cent, and /w/section-194-ib-1, -3, -4 and /w/section-194ib-9 return HTTP 404. Section 194-IB history: /w/section-194ib (Year: 2017) carries footnote 46, 'Ins. by Act No. 7 of 2017 (w.e.f. 1-6-2017)'; /w/section-194-ib (Year: 2021) prints sub-section (4) as referring to 'section 206AA or section 206AB' with footnote 78, 'Ins. by the Act No. 13 of 2021, w.e.f. 1-7-2021'; /w/section-194ib-3 (Year: 2022) prints sub-section (4) with section 206AA alone and carries footnote 95, 'Words "or section 206AB" omtt. by the Act No. 06 of 2022, w.e.f. 1-4-2022. Earlier the quoted words were inserted by the Act No. 13 of 2021, w.e.f. 1-7-2021'; and /w/section-194ib-5 (Year: 2024 (No. 1)) carries footnote 29 in different words to the same effect, 'Words "or section 206AB" omitted by the Finance Act, 2022, w.e.f. 1-4-2022'. Those last two pages together are what pins Act No. 6 of 2022 to the Finance Act, 2022. Section 194M, heading 'Payment of certain sums by certain individuals or Hindu undivided family': current text from https://incometaxindia.gov.in/w/section-194m-8 (Year: 2026), footnote 47, 'Sub. for "five" by Act No. 15 of 2024, w.e.f. 1-10-2024', corroborated word for word on /w/section-194m-7 (Year: 2025), whose footnote is printed as '97-98. Sub. for "five" by Act No. 15 of 2024, w.e.f. 1-10-2024'. That the earlier rate was five per cent is confirmed on /w/section-194m-2 (Year: 2021), /w/section-194m-3 (Year: 2022) and /w/section-194m-4 (Year: 2023). The insertion of section 194M is footnoted on /w/section-194m-2 as footnote 2, 'Sections 194M and 194N Ins. by the Act. No. 23 of 2019, w.e.f. 1-9-2019'. Act No. 7 of 2017 IS the Finance Act, 2017: /w/section-194ib-7 (Year: 2018) carries footnote 10, 'Ins. by the Act No. 7 of 2017 (w.e.f. 1-6-2017)', and /w/section-194ib-8 (Year: 2019 (No. 1)) carries footnote 10 against the same words, 'Ins. by the Finance Act, 2017 (w.e.f. 1-6-2017)' — the department giving both forms on two year-stamps of the same section, which is a mapping this project can now rely on. I did NOT verify from any source read this pass that Act No. 15 of 2024 is the Finance (No. 2) Act, 2024, that Act No. 13 of 2021 is the Finance Act, 2021 or that Act No. 23 of 2019 is the Finance (No. 2) Act, 2019; those Act numbers are given as the department prints them. A CORRECTION TO THE BRIEF that commissioned this entry: it describes 'the s.194-IB(4) cap limiting the deduction to the last month's rent' without qualification. On the text of every version of the sub-section read this pass, the cap operates only 'in a case where the tax is required to be deducted as per the provisions of section 206AA' (and, between 1 July 2021 and 1 April 2022, section 206AB as well). No rule was read this pass — a probe of https://incometaxindia.gov.in/w/rule-30 returned a page headed 'Differential pricing', which is not an Income-tax Rule — so Forms 16C, 26QC, 16D and 26QD are named only from the 'See rules ... and Form Nos. ...' notes printed on the departmental section pages themselves, and no statement is made about the time limits or mechanics prescribed by the rules. 'decided_on', 1 October 2024, is the COMMENCEMENT DATE of the rate substitution in both sections recorded in footnote 42 / footnote 97 (s.194-IB) and footnote 47 / footnote 97-98 (s.194M), not a decision date; this is a statutory entry and there is no decision behind it. The Explanations were verified this pass: section 194-IB's defines 'rent' as 'any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both', and section 194M's borrows 'contract' and 'work' from the Explanation to section 194C, 'commission or brokerage' from section 194H and 'professional services' from section 194J, exactly as stated above. The Form references come from footnote 28 on /w/section-194ib-5, 'See rules 30, 31, 31A & 37BA & Form Nos. 16C, 26B, 26QC and 27A.', and footnote 41 on /w/section-194m-4, 'See rules 28, 30, 31, 31A and 37BA and Form Nos. 13, 16D, 26B, 26QD and 27A.' This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
From 1 October 2024 the rate under each section is two per cent, substituted for five per cent. Under section 194-IB the deduction is made once, at the credit or payment of the last month's rent of the previous year or of the tenancy, on rent exceeding fifty thousand rupees for a month or part of a month; the cap in sub-section (4) limiting the deduction to the last month's rent operates only where tax is required to be deducted as per section 206AA. Under section 194M the deductor must be an individual or Hindu undivided family who is not required to deduct under section 194C, 194H or 194J, and no deduction is required unless the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Section 203A applies to neither, so neither deductor requires a tax deduction account number.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
We sell prepaid SIMs and vouchers to distributors below list price. Is that margin commission under 194H?
I buy stamp papers from the government at a discount and resell them. Is that discount commission under 194H?
We paid stock exchange transaction charges without TDS. Are those fees for technical services under 194J?
I did not deduct TDS, but the person I paid has already paid tax on it. Can the department still recover it from me?