CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194-IB — Payment of Rent by Certain Individuals or Hindu Undivided Family
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Inserted by the Finance Act, 2017 (w.e.f. 1 June 2017); mechanical.
Finance Act, 2026: No amendment. (Rate reduced from 5% to 2% by the Finance (No.2) Act, 2024 w.e.f. 1 October 2024.)
Mechanism: An individual/HUF not liable to tax audit, paying rent exceeding ₹50,000 a month to a resident, deducts tax once a year (or on vacating) through Form 26QC, no TAN.
Litigation profile: None. A recent, mechanical provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194-IB, inserted by the Finance Act, 2017 with effect from 1 June 2017, requires an individual or Hindu undivided family (not being one liable to tax audit under section 44AB) paying rent to a resident exceeding ₹50,000 for a month or part of a month, to deduct tax. It extends the rent-withholding net to individuals and HUFs who are otherwise outside section 194-I, while keeping compliance light: deduction is once in the financial year (or on vacating/at the end of the tenancy), through Form 26QC, with no TAN.
The rate was five per cent and was reduced to two per cent by the Finance (No.2) Act, 2024 with effect from 1 October 2024. Section 194-IB applies precisely where section 194-I does not — that is, to individual/HUF payers below the section 44AB threshold paying rent above ₹50,000 a month; larger payers, and individuals/HUF above the audit limits, deduct under section 194-I instead. The deduction in the last month is capped so as not to exceed the rent for that month.
A mechanical, recent provision — candour
Section 194-IB is mechanical and recent and has generated no body of judicial authority on its own terms. In candour, it must be applied from its plain terms read with the meaning of 'rent' in section 194-I, and with the general machinery and default provisions of the Chapter.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194-IB. (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 income-tax referred to in sub-section (1) 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, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of 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, as the case may be.
Explanation.—For the purposes of this section, "rent" means 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.
C. AUTHORITIES
Candour rule strictly observed: section 194-IB is a recent, mechanical provision with no judicial authority. Only the statutory scheme and cognate 'rent' meaning are offered.
Principle: 'Rent' in section 194-IB carries the wide meaning it bears in section 194-I; the difference is only in the payer (small individual/HUF) and the compliance mode (Form 26QC, no TAN, once-a-year deduction).
Use: Imports the developed section 194-I 'use versus service' learning into section 194-IB.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194-IB.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194-IB — Payment of Rent by Certain Individuals or Hindu Undivided Family
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Inserted by the Finance Act, 2017 (w.e.f. 1 June 2017); mechanical.
Finance Act, 2026: No amendment. (Rate reduced from 5% to 2% by the Finance (No.2) Act, 2024 w.e.f. 1 October 2024.)
Mechanism: An individual/HUF not liable to tax audit, paying rent exceeding ₹50,000 a month to a resident, deducts tax once a year (or on vacating) through Form 26QC, no TAN.
Litigation profile: None. A recent, mechanical provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194-IB, inserted by the Finance Act, 2017 with effect from 1 June 2017, requires an individual or Hindu undivided family (not being one liable to tax audit under section 44AB) paying rent to a resident exceeding ₹50,000 for a month or part of a month, to deduct tax. It extends the rent-withholding net to individuals and HUFs who are otherwise outside section 194-I, while keeping compliance light: deduction is once in the financial year (or on vacating/at the end of the tenancy), through Form 26QC, with no TAN.
Rate, timing and the section 194-I boundary
The rate was five per cent and was reduced to two per cent by the Finance (No.2) Act, 2024 with effect from 1 October 2024. Section 194-IB applies precisely where section 194-I does not — that is, to individual/HUF payers below the section 44AB threshold paying rent above ₹50,000 a month; larger payers, and individuals/HUF above the audit limits, deduct under section 194-I instead. The deduction in the last month is capped so as not to exceed the rent for that month.
A mechanical, recent provision — candour
Section 194-IB is mechanical and recent and has generated no body of judicial authority on its own terms. In candour, it must be applied from its plain terms read with the meaning of 'rent' in section 194-I, and with the general machinery and default provisions of the Chapter.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194-IB. (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 income-tax referred to in sub-section (1) 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, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of 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, as the case may be.
Explanation.—For the purposes of this section, "rent" means 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.
C. AUTHORITIES
Candour rule strictly observed: section 194-IB is a recent, mechanical provision with no judicial authority. Only the statutory scheme and cognate 'rent' meaning are offered.
No direct authority — statutory backdrop
Meaning of 'rent' — borrowed from section 194-I
Principle: 'Rent' in section 194-IB carries the wide meaning it bears in section 194-I; the difference is only in the payer (small individual/HUF) and the compliance mode (Form 26QC, no TAN, once-a-year deduction).
Use: Imports the developed section 194-I 'use versus service' learning into section 194-IB.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194-IB.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.