Paying Rent Above 50,000 Here’s What You Need to Know About TDS on Rent (Section 194-IB)
Renting a home in a city like Mumbai, Delhi, or Bengaluru often means paying monthly rents above 50,000. But did you know that if your rent exceeds ?50,000 per month, you as a tenant have a legal responsibility to deduct Tax Deducted at Source (TDS) and deposit it with the government?
Here’s a step-by-step guide to understand your obligations, avoid penalties, and stay compliant with Indian tax laws.
What is Section 194-IB?
Section 194-IB of the Income Tax Act was introduced to bring transparency to high-value house rentals. It applies to:
? Any individual or Hindu Undivided Family (HUF) paying monthly rent above ?50,000.
? You must deduct 2% TDS on the total annual rent and deposit it with the government.
? This applies even if you’re not running a business and don’t have a TAN.
When Does TDS Apply?
| Monthly Rent | TDS Applicability |
|---|
| Up to 50,000 | NO TDS required |
| 50001 & above | Deduct 2% TDS at year-end |
Example: How Much TDS Do You Deduct?
Monthly Rent
| Annual Rent
| TDS @2%
|
|---|
| 50,000 | 6,00,000 | NIL |
| 1,00,000 | 12,00,000 | 24,000 |
| 1,50,000 | 18,00,000 | 36,000 |
| 2,00,000 | 24,00,000 | 48,000 |
| 5,00,000 | 60,00,000 | 1,20,000 |
| 10,00,000 | 1,20,00,000 | 2,40,000 |
Step-by-Step Guide for Tenants
Step 1 – Deduct TDS at Year-End
-
Deduct 2% TDS on the total rent for the financial year.
-
Example: For 1 lakh/month rent, annual rent is 12 lakh. Deduct 24,000 TDS in March.
Step 2 – File Form 26QC Online
Step 3 – Issue Form 16C to Landlord
-
After filing Form 26QC, download Form 16C (TDS Certificate) from TRACES website.
-
Provide Form 16C to your landlord within 25 days of filing Form 26QC.
What If You Don’t Deduct TDS?
Failure to deduct and deposit TDS can make you an “assessee in default”:
-
?? Interest: 2.5% per month on unpaid TDS
-
?? Penalty: Additional fines under Section 271C
-
?? Prosecution: In extreme cases, imprisonment between 3 months to 7 years
However, if your landlord has already paid tax on the rent income, you may avoid default status by submitting Form 26A with your CA’s help.
Key Points to Remember
No TAN required—your PAN is enough.
Deduct TDS only once at year-end or upon vacating.
File and pay TDS within 30 days of deduction
Give Form 16C to your landlord within 25 days.
Why is This Rule Important?
The Income Tax Department introduced Section 194-IB to ensure high-value rents are reported and taxed. As a tenant, following this rule keeps you on the right side of the law and prevents unwanted notices from the IT department.
Quick Checklist for Tenants Paying >50,000 Rent
Deduct 2% TDS at year-end
File Form 26QC online within 30 days
Issue Form 16C TDS certificate to landlord
Final Words
If your monthly rent is 50,000 or below – relax, no TDS for you.
But for higher rents, a little effort now saves you from big trouble later.
Need help filing Form 26QC or issuing Form 16C? Consult your Chartered Accountant or tax advisor. or Call - Sandeep Sadh on 9820030685 for more assistance.