If you're a tenant paying more than ₹50,000 per month in rent, you're legally required to deduct TDS before paying your landlord. If you're a landlord receiving rent with TDS deducted, you need to know how to claim it back. Either way, here's the five-minute guide.
- Individuals paying rent above Rs 50,000/month deduct 5% TDS under 194-IB (no TAN needed).
- Audited businesses deduct under 194-I (10% / 2%) and need a TAN.
- Tenants file Form 26QC and issue Form 16C to the landlord.
- Landlords claim the credit via Form 26AS in their ITR.
TDS on rent trips up both sides of the lease. Tenants forget to deduct, and landlords don't know how to track what was deducted on their behalf. The rules are actually straightforward once you see them laid out.
When does TDS on rent apply?
The obligation depends on who you are:
- Individuals and HUFs not subject to audit: if your monthly rent exceeds ₹50,000, you must deduct TDS at 5% under Section 194-IB. You don't need a TAN, just your PAN and the landlord's PAN.
- Businesses and professionals subject to audit: TDS is deducted under Section 194-I at 10% for rent on land, building or furniture, and 2% for rent on plant, machinery or equipment. You need a TAN.
How to deduct and deposit TDS (for tenants)
For individual tenants under Section 194-IB, the process is surprisingly simple:
- Deduct 5% from the rent payment. If your rent is ₹60,000, you pay the landlord ₹57,000 and hold back ₹3,000.
- File Form 26QC on the TRACES portal within 30 days of the end of the month in which TDS was deducted. This is a one-page online form, no TAN required.
- Issue Form 16C to your landlord within 15 days of filing 26QC. This is the landlord's proof that TDS was deducted and deposited.
For businesses with a TAN, the process uses the regular TDS machinery, Form 26Q filed quarterly, with monthly deposits by the 7th of the following month.
What landlords need to know
If your tenant deducts TDS, that money isn't lost. It's deposited with the government on your behalf, and you claim it as a credit when you file your income tax return. Here's how to make sure it goes smoothly:
- Share your PAN with the tenant. Without it, they're required to deduct at 20% instead of 5%, and you'll have a harder time claiming the credit.
- Check your Form 26AS on the income tax portal. Every TDS deduction your tenant makes should show up here. If it doesn't, follow up, the tenant may not have filed their 26QC.
- Claim the credit in your ITR. The TDS deducted on your rental income appears under “TDS on other than salary” in your return. Match it against 26AS to ensure full credit.
“The most common landlord complaint isn't about TDS itself. It's about tenants who deduct the tax but don't deposit it, leaving the landlord with a reduced rent and no credit to show for it.”
Penalties for non-compliance
Both sides have skin in the game:
- Tenant fails to deduct: the tenant becomes liable to pay the TDS amount themselves, plus interest at 1% per month from the date it should have been deducted.
- Tenant deducts but doesn't deposit: interest at 1.5% per month from the date of deduction to the date of deposit, plus a possible penalty equal to the TDS amount under Section 271C.
- Late filing of 26QC: ₹200 per day of delay under Section 234E, capped at the TDS amount.
194-IB vs 194-I at a glance
| Section 194-IB | Section 194-I | |
|---|---|---|
| Who deducts | Individuals/HUF (non-audit) | Businesses (audit) |
| Threshold | Rs 50,000/month | Rs 2.4 lakh/year |
| Rate | 5% | 10% (2% for plant/machinery) |
| TAN needed | No | Yes |
| Return | 26QC | 26Q |
Frequently asked questions
Is the Rs 50,000 limit monthly or annual?
Monthly. If any single month's rent exceeds Rs 50,000, TDS applies under 194-IB for that payment.
What if my landlord doesn't share their PAN?
Without PAN you must deduct at 20% instead of 5%, and the landlord will struggle to claim credit. Always collect the PAN first.
How does a landlord get the deducted TDS back?
It appears in Form 26AS and is claimed as a credit in the ITR against rental income. See our TDS return guide.
TDS on rent doesn't have to be a headache. Set a calendar reminder, keep your landlord's PAN handy, and file on time. Or better yet, let FilingSetu handle your TDS filings so you never miss a deadline or a form.
