TDS on Rent Above ₹50,000: What Tenants Must Do Before the Deadline

This article is for educational purposes only and does not constitute financial advice or tax advice. Tax laws change; consult a chartered accountant for your specific situation.

The myth: "TDS on rent is the landlord's problem"

A large number of tenants paying ₹50,000–₹1 lakh per month in rent in India's major cities are technically in violation of the Income Tax Act every month — not because they intended to evade tax, but because they believe TDS on rent is something landlords handle.

It is not. Under Section 194-IB of the Income Tax Act, 1961, the responsibility to deduct TDS on rent lies entirely with the tenant (individual or HUF) paying rent above ₹50,000 per month. The landlord's obligation is separate and applies only when they receive rental income. Most individual tenants are completely unaware of 194-IB because it was introduced only in June 2017 and awareness has been low.

Here is what you need to know and do.

Who must deduct TDS under Section 194-IB?

Section 194-IB applies when all of the following are true:

You are an individual or HUF (Hindu Undivided Family) — not a company or firm
You are paying rent for land, building, or furniture
The monthly rent exceeds ₹50,000
The rent is paid to a resident landlord (different rules apply for NRI landlords under 195)

If you are a company or firm paying rent, Section 194-I applies with a ₹2.4 lakh annual threshold (₹20,000/month) — a different provision with different filing requirements.

How much TDS must be deducted?

Landlord type	TDS rate
Resident individual or HUF (with PAN)	2% of rent
Resident individual or HUF (without PAN)	20% of rent
Any landlord (if rent declared as business income)	10%

From FY2024–25, the TDS rate under 194-IB was revised from 5% to 2% (effective October 1, 2024 per Finance Bill 2024).

Example: Monthly rent of ₹80,000 to a landlord with a valid PAN.

Annual rent: ₹9,60,000
TDS to deduct: 2% of ₹9,60,000 = ₹19,200
Timing: TDS is deducted only once — in the last month of the financial year (March), or in the last month of tenancy if you vacate before March

This once-a-year deduction is the unusual feature of 194-IB. Unlike other TDS provisions where deduction happens on each payment, 194-IB requires a single deduction in March (or at tenancy end).

When to deposit and how to file

Once you deduct TDS in March (or on the last month's rent before vacating), you must:

Deposit the TDS to the government using Form 26QC — an online challan-cum-statement
Deadline: Within 30 days from the end of the month in which TDS was deducted
- If you deduct in March 2026: deposit by April 30, 2026
File on the Income Tax portal: itd.gov.in → e-Filing → TDS → Form 26QC
Issue Form 16C to your landlord within 15 days of filing Form 26QC

No TAN (Tax Deduction Account Number) is required — Form 26QC uses your PAN instead. This was specifically designed to simplify compliance for individual tenants.

What happens if you don't comply?

Non-compliance	Penalty
Failure to deduct TDS	Interest at 1% per month on the undeducted amount
Failure to deposit after deduction	Interest at 1.5% per month on the deducted amount
Late filing of Form 26QC	₹200 per day (maximum total penalty = TDS amount)
Non-filing of Form 26QC	Penalty under Section 271H: ₹10,000 to ₹1,00,000

Beyond penalties, the landlord's PAN becomes non-compliant — their rental income may be flagged by the department as TDS not deposited, leading to demand notices for them as well. If the landlord discovers this, it creates tenancy friction.

Additionally, the tenant cannot claim the rent as a deduction (in business income scenarios) or in HRA calculations if TDS was not deducted as required. The Income Tax Department now matches Form 26AS and AIS data and flags cases where landlords report rental income but no corresponding TDS appears under their PAN.

The NRI landlord exception

If your landlord is an NRI (Non-Resident Indian) or a foreign entity, Section 194-IB does not apply. Instead, Section 195 requires TDS at 30% (plus surcharge and cess) on rent paid to NRIs, regardless of amount. This is a separate and more complex provision requiring a TAN and quarterly TDS returns. If your landlord is an NRI, consult a CA.

Practical steps for individual tenants

Step 1: Collect your landlord's PAN card copy (keep it on file)

Step 2: Calculate your total annual rent. If monthly rent × 12 exceeds ₹6,00,000 (i.e., monthly rent is above ₹50,000), you are covered by 194-IB

Step 3: In March (or your final month of tenancy), deduct 2% of the annual rent from that month's payment

If annual rent is ₹8,40,000 → TDS = ₹16,800
Pay the landlord ₹70,000 − ₹16,800 = ₹53,200 for March; ₹70,000 for all other months

Step 4: File Form 26QC online at incometax.gov.in within 30 days of March

Step 5: Issue Form 16C to landlord within 15 days of filing Form 26QC

Step 6: Keep Form 26QC challan and Form 16C copies for ITR documentation

Use the Stax TDS Calculator to compute the exact deduction amount and check applicable rates for different payment types.

Does this affect HRA exemption?

No — for salaried employees claiming HRA exemption under Section 10(13A), the TDS obligation under 194-IB is separate from the HRA submission to the employer. You still submit rent receipts and landlord PAN to your employer for HRA. The 194-IB TDS is an additional compliance step as a tenant, not a replacement for HRA procedures.

The landlord's side

For landlords receiving rent above ₹50,000/month from an individual tenant, the TDS obligation lies with the tenant. However, the landlord must:

Provide their PAN to the tenant
Account for the TDS in their ITR (the TDS credit appears in their Form 26AS after the tenant files Form 26QC)
Report gross rental income (before TDS deduction) in their return

If TDS is not deducted by the tenant, the landlord is still responsible for paying advance tax on rental income. They should not assume the tenant has complied — check Form 26AS at the end of the year to confirm TDS credit.

By Grishma, personal finance writer at Stax Tools. TDS rates verified against Finance Act 2024 provisions effective October 1, 2024.

Sources & methodology

Income Tax Act, 1961 — Section 194-IB (inserted by Finance Act, 2017)
Finance Bill 2024 — Amendment to Section 194-IB TDS rate (2% effective Oct 1, 2024)
CBDT Circular No. 08/2024 — Clarification on TDS under 194-IB
Income Tax e-Filing portal — Form 26QC filing instructions, incometax.gov.in