Question

What is the rate of TDS applicable for Assessment Year 2020-21 on payment of rent by an individual in excess of Rs. 50,000 per month under Section 194IB of Income Tax Act 1961?
1. 2%
2. 5%
3. 20%
4. 10%

Answer 1

Correct Answer - Option 2 : 5%

The rate of TDS applicable for Assessment Year 2020-21 on payment of rent by an individual in excess of Rs. 50,000 per month under Section 1941B of Income Tax Act 1961 w.e.f. 01.06.2017 is 5%.

• Section 194IB of the Income Tax Act is a provision that is enacted to ensure that TDS or Tax Deducted at Source is withheld on rental payments.
• As per the Finance Act, 2017, “TDS on Rent” under Section194IB is liable to be deducted by Individuals or HUFs (Hindu Undivided Family).
• After section 194IA, the Government of India has inserted Section 194IB. The key objective of inserting this section is to curb tax evasion by landlords. 
• Section 194-IB provides that for all the transactions with effect from June 1, 2017, tax at a rate of 5% should be deducted by the Tenant, Payer, or Lessee at the time of making payment of rent to Lessor, Landlord or Payee. The tax deducted should be deposited to the Government Account online by any of the authorized bank branches.