Renters Above Rs 50,000: TDS Deduction Under Section 194-IB Deadline Looms

TDS on Rent Payments: Key Details and Compliance Requirements

Overview

Under the Income Tax Act, 1961, individuals or Hindu Undivided Families (HUFs) paying rent exceeding Rs 50,000 per month to a landlord must deduct tax at source. This requirement applies to those who are not subject to tax audit under Section 44AB.

Section 194-IB: TDS on Rent Payments

Read also: Correcting Credit Score Errors: A Guide to Ensuring Accurate CIBIL Reports and Optimal Loan Eligibility

Section 194-IB deals with TDS on rent payments. Individuals or HUFs paying rent exceeding Rs 50,000 per month to a resident landlord are required to deduct tax at source. The applicable TDS rate under this provision was reduced from 5% to 2% in the Union Budget 2024, effective from October 1, 2024.

Compliance Requirements

The deducted TDS must be deposited with the Government within 30 days from the end of the month in which deduction is made. For example, TDS deducted in March 2026 is to be deposited by April 30, 2026. Failure to comply with these requirements may lead to penalties and interest charges, including interest charges (1% per month for non-deduction and 1.5% for non-payment after deduction), a late filing fee of Rs 200 per day, and penalties up to Rs 1 lakh under Section 271H for not filing TDS returns.

Process for TDS Payment Under Section 194IB

Read also: Missing a Single EMI Payment Can Adversely Impact Credit Profile

Once the payment is successfully submitted, save the payment acknowledgement number for records. Download and print Form 26QC for documentation. After the payment, issue Form 16C to the landlord as proof of TDS deduction, which the landlord can use while filing their income tax return.