The Union Budget 2024 revised the TDS rate on rent payments under Section 194-IB from 5% to 2%, effective October 1, 2024. It has now become important for an Individual to be prepared with an additional compliance in case they are paying rent above a certain amounts. There were confusion related to following the procedure of compliances and hence to make it more easy below are the Frequently Asked Questions on the applicability of TDS on Payment of Rent by an Individual.
Q1. What is the TDS required to be deducted by a Taxpayer paying monthly rent to a Landlord?
Ans:- Section 194-IB of the Income Tax Act, 1961 which was introduced from 1st June 2017 requires an individual or a Hindu Undivided Family (HUF) to deduct TDS at the rate of 2%, whose total sales or turnover from business doesn’t exceed ₹1 crore, or receipts from profession doesn’t exceed ₹50 lakh, in the previous financial year and to whom the Tax Audit is not applicable) paying monthly rent of Rs.50000 or more is required to deduct Tax at the rate of 2% on the rent amount and pay to the Income tax.
Q2. How frequently the Tax be deducted by a Tenant?
Ans:-In case taxpayer is occupying a rented property from April 2025 to March 2026, and is paying monthly rent of ₹60,000, then Tax is to be deducted in March 2026 the last month of the financial year. But if taxpayer’s tenancy ends earlier, say in October 2025, then Tax must be deducted on the rent till October, as it is the last month of tenancy. This ensures that TDS compliance is fulfilled either at the financial year-end or tenancy-end, whichever happens earlier. There is no requirement to pay TDS on a monthly or quarterly basis.
Q3. What does “rent” mean under this section?
Ans:– The term “rent” includes any payment, by whatever name called, made under a lease, sub-lease, tenancy, or any other agreement or arrangement, for the use of land, building, or both.
Q4. How should the tax be deducted and paid?
Ans:- The tax so deducted has to be deposited to the Government Account through online by any of the authorized bank branches. The Tax has to be deducted at the rate of 2%. Further if the Landlord does not have PAN then the tenant must deduct TDS at a higher rate of 20% if the Landlord fails to provide a valid PAN.deducted tax must be deposited through Form 26QC, which is a challan-cum-statement. It must be filed within 30 days from the end of the month in which TDS is deducted. After filing Form 26QC, the tenant must also issue Form 16C, which is a TDS certificate, to the landlord.
Q5. What are the penal provisions of non compliance?
Ans:-If you have claimed HRA, but did not pay TDS on rent, the tax department may consider your claim invalid. If TDS is not paid, 1% interest per month is charged. However, if TDS is deducted but not deposited on time, the interest rises to 1.5% per month.
Q.6 Suppose Mr.X, a salaried employee, pays rent of Rs 65,000 per month to Mr. Y. Is he required to deduct Tax at source for the financial year 2025-26?
Ans:- Yes. Mr. Shan pays rent exceeding Rs 50,000 per month in the financial year; therefore he is liable to deduct tax at source @2% of such rent. Thus, Rs 15600 (Rs 65000*2%*12 months) has to be deducted from rent payable for March, 2026.
Q7. In above case if Mr. Shan vacated the premises on 30th November 2025, what will be his liability?
Ans:- If Mr. Shan vacated the premises on 30th November 2025, then tax of Rs 10400 (Rs 65000*2%*8 months) has to be deducted from the rent payable for November 2025.
Understanding TDS on rent might seem overwhelming, but with timely action and proper documentation, it’s easy to comply.
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