TDS Rate Cuts October 2024
Rent/commission TDS reduced from 5% to 2%
What is This Hack?
Rent, commission, brokerage TDS reduced from 5% to 2% effective October 1, 2024, improving cash flow for payees by 60%
How It Works
Finance Minister announced a major relief in Interim Budget 2024: TDS rates on rent (Section 194-IB), professional fees/commission (Section 194H, 194J certain cases), and brokerage (Section 194H) were reduced from 5% to 2% effective October 1, 2024. This is a 60% reduction in TDS deduction, dramatically improving cash flow for landlords, consultants, agents, and brokers. For example, if you receive ₹1 lakh rent monthly, earlier TDS was ₹5,000/month (₹60K annually) blocked. Now only ₹2,000/month (₹24K annually) blocked - saving ₹36K in cash flow. You still get refund if tax due is lower, but the waiting period for refund reduces from 12-18 months to essentially 4-6 months since less money is blocked upfront.
Step-by-Step Implementation
Verify Applicability
Check if your income falls under reduced TDS rates: Rent under Section 194-IB (resident landlord, monthly rent > ₹50K), Commission/brokerage under 194H, Certain professional fees. Effective for payments made from October 1, 2024 onwards.
Inform Payers (if needed)
Most payers (companies, platforms) automatically updated rates from October 2024. But if you notice 5% TDS still being deducted after October 1, inform payer to update to 2% rate.
Verify TDS Certificates
Check Form 16A/16 received from payers. For payments from October 2024 onwards, TDS rate should show 2%, not 5%. If showing 5%, raise dispute with payer and TDS Justification Unit.
Update Advance Tax Calculation
With lower TDS, your advance tax liability may increase since less tax is deducted at source. Recalculate advance tax using our calculator to avoid interest u/s 234B and 234C.
File ITR Claiming Credit
When filing ITR, total TDS (both at 5% before October and 2% after October) will be credited. If total tax deducted exceeds actual liability, you get refund. With 2% rate, refund amount increases since less was deducted.
Monitor Form 26AS
Regularly check Form 26AS/AIS to ensure all TDS is credited to your PAN. Discrepancies should be resolved within FY to avoid refund delays.
Real Example: Landlord with Commercial Property
Situation
Sunita rents out her commercial office space in Bangalore for ₹2 lakh/month (₹24 lakh annually) to a company. Tenant deducts TDS and pays net amount. Her actual tax liability after all deductions: ₹4 lakh annually.
Without This Hack
Old rate (5% TDS till Sept 2024): Monthly TDS = ₹10,000. Annual TDS = ₹1.2 lakhs. She receives net ₹22.8L. Excess TDS = ₹1.2L - ₹4L (no excess, she owes more). But ₹1.2L is blocked upfront.
With This Hack
New rate (2% TDS from Oct 2024): Oct-Mar (6 months): TDS @ 2% = ₹4,000/month = ₹24K total. April-Sept (6 months): TDS @ 5% = ₹10K/month = ₹60K. Total annual TDS: ₹84K. Cash flow improvement: ₹36K less blocked (₹1.2L vs ₹84K).
💰 ₹36,000 annual cash flow improvement + faster refunds
Common Pitfalls to Avoid
- Applies only from October 1, 2024 onwards - payments before this date still at old rates
- Lower TDS means higher advance tax liability - recalculate to avoid interest
- Not all TDS sections reduced - check specific section applicability
- Some payers may not have updated systems - verify and inform them
- If PAN not linked with Aadhaar, TDS is 20% regardless of reduced rates
- Refund processing time is still same (6-12 months) - only upfront blockage reduces
Prerequisites & Requirements
- Receiving payments under applicable TDS sections (194-IB, 194H certain cases)
- Valid PAN card linked with Aadhaar
- Payments made from October 1, 2024 onwards
- Resident individual (NRIs have separate TDS rates)
- Monitor Form 26AS for correct TDS credit
- File ITR to claim any excess TDS refund
Key Benefits
- Potential savings: 60% cash flow improvement
- Implementation time: Automatic
- Legal status: fully legal
- Risk level: low