TDS Rate Cuts October 2024
Rent/commission TDS reduced from 5% to 2%
overview
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
How it works
The Finance (No. 2) Act 2024 - the July 2024 Budget, not the February interim budget - reduced TDS from 5% to 2% effective October 1, 2024 on rent paid by individuals or HUFs (Section 194-IB), commission and brokerage (Section 194H), life insurance policy payouts (Section 194DA), commission on lottery tickets (Section 194G) and Section 194M payments. Section 194J was not among them: professional and technical fees remain at 10%. 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.
steps
Step-by-step guide
Verify Applicability
Check if your income falls under reduced TDS rates: Rent under Section 194-IB (rent paid by an individual or HUF not covered by the second proviso to Section 194-I, monthly rent > ₹50K), Commission/brokerage under 194H, and Sections 194DA, 194G and 194M. Professional fees under 194J were NOT reduced and remain at 10%. 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.
example
Real Example: Landlord with Commercial Property
situation
Sunita rents out her commercial office space in Bangalore for ₹2 lakh/month (₹24 lakh annually) to an individual tenant who is not subject to tax audit, so Section 194-IB applies. (A company tenant would deduct under Section 194-I at 10% instead - a rate that was not reduced.) Tenant deducts TDS and pays net amount.
without this hack
Old rate (5% TDS till Sept 2024): Monthly TDS = ₹10,000. Annual TDS = ₹1.2 lakhs. She receives net ₹22.8L, with ₹1.2L blocked upfront until her return is processed.
with this hack
New rate (2% TDS from Oct 2024): in the transition year FY 2024-25 the two rates split the year - April-Sept at 5% = ₹10K/month = ₹60K, Oct-Mar at 2% = ₹4,000/month = ₹24K, total ₹84K against ₹1.2L at the old rate, i.e. ₹36K less blocked. From FY 2025-26 onwards the whole year is at 2% = ₹48K, i.e. ₹72K less blocked than under the old 5% rate.
- 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
- 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
- Potential savings: 60% cash flow improvement
- Implementation time: Automatic
- Legal status: fully legal
- Risk level: low
related topics
Related Calculators
TDS Comprehensive Calculator
Calculate TDS across salary, interest, rent, professional fees with latest rates (rent 2% - Oct 2024)
open →CALCULATORHRA Exemption Calculator
Calculate tax-exempt HRA with metro vs non-metro rates and landlord PAN requirement checker
open →CALCULATORSponsorship Income Tracker
Track multiple brand deals, payment status, TDS deductions, and cash flow projections for content creators
open →CALCULATORNRI Rental Income Tax Calculator
Calculate tax on Indian property rental with 30% standard deduction, housing loan interest, and DTAA rates
open →CALCULATORNRI Investment Tax Planning
Compare tax implications across different NRI investment options with TDS rates and post-tax returns
open →Related Articles
TDS Rate Chart 2025-26: Complete List of All TDS Sections
Updated TDS rates for FY 2025-26 with October 2024 amendments
open →GUIDETDS Explained: Complete Guide to Tax Deducted at Source
Everything you need to know about TDS including rates, filing, and compliance
open →GUIDEForm 16: Complete Guide with Download & Verification Process
What is Form 16, how to download, and use it for ITR filing
open →GUIDENRI Rental Income: Tax Planning, TDS & Deductions
How to minimize tax on rental income from India property
open →GUIDEContent Creator Team & Payroll Taxation: Complete Guide
Understand employee vs contractor classification, TDS requirements, and payroll compliance when hiring team members for your content creation business.
open →related tax hacks
Need help implementing this hack?
Get expert guidance from CA Ashama Rajawat on implementing this strategy correctly for your specific situation.