TDS on Rent

Since 1 April 2025 both sections turn on the same test. Rent for a month, or part of a month, exceeding ₹50,000. Section 194-I previously used an annual threshold of ₹2,40,000. That change caught many landlords and tenants who had never deducted anything.

Who has to deduct TDS on rent?

Note the effect of the 2025 change on 194-I. The test is now monthly, not annual. And once the month crosses ₹50,000, the deduction applies to the whole month’s rent. Not just the excess.

How does Section 194-IB work for a tenant?

It is deliberately built for people who are not businesses, so it is simpler than it looks.

You deduct once, not every month. It happens on the rent for the last month of the financial year. Or the last month of the tenancy, if you move out first. So a tenant staying the full year deducts in March, on the March rent.

The amount is 2% of the total rent paid for the period. Not 2% of one month. That is the point that trips people up. You deduct a year’s worth of tax out of a single month’s payment.

Then you file Form 26QC. It is a challan-cum-statement, so filing and paying happen together. The deadline is 30 days from the end of the month of deduction. There is no TAN to apply for and no quarterly return.

Afterwards, issue the landlord Form 16C. They will need it to claim the credit against their own tax.

What if my landlord has no PAN?

This is the expensive scenario, and it is common with individual landlords.

Section 206AA overrides the normal rate. Without the landlord’s PAN, the rate becomes 20%.

Under 194-IB there is a cap that softens it. The tax deducted cannot exceed the last month’s rent, whether of the financial year or of the tenancy. So the deduction is limited to one month’s rent.

Read that carefully. It caps what you can deduct, not what is owed. Say 20% of the annual rent exceeds one month’s rent. You have discharged the obligation, but the shortfall becomes a dispute you do not want. Get the PAN in writing when you sign. Put it in the agreement itself. Our rent agreement guide covers what else belongs there.

What happens if you do not deduct

Interest runs on the amount from the date it should have been deducted. A further interest charge applies from deduction to deposit. A late filing fee applies for every day Form 26QC is late, and there are penalty provisions on top.

The uncomfortable part is who bears it. The obligation is the tenant’s. If you did not deduct because your landlord asked you not to, the department comes to you, not to them. That conversation is worth having before you sign, not in year three.

The Income-tax Act, 2025 has replaced the 1961 Act. The Income Tax Department confirms that the TDS rates and monetary thresholds for all categories of payments have been retained as they are. So the figures above did not move with the new Act.

Does this affect my HRA claim?

They are separate obligations that often apply to the same rent, and both matter.

For house rent allowance, you need your landlord’s PAN once the annual rent crosses ₹1,00,000, to give your employer. For TDS under 194-IB, you need it once the monthly rent crosses ₹50,000. Cross both thresholds and you have two reasons to hold the same document.

The practical advice is the same either way. Collect the PAN and the rent receipts as you go. Not in February, when payroll asks. Our HRA exemption page sets out the calculation and the HRA calculator runs it.

If you are the landlord, the deducted tax shows in your Form 26AS and offsets your own liability. Check it appears. A tenant who deducted but never filed Form 26QC leaves you with a credit you cannot claim. See TDS rates for the wider table and TDS on property sale if you are buying instead of renting.