Many people living in rented apartments pay significant amounts in rent every month. But what they don’t know is that if the monthly rent exceeds a certain threshold, you’re required to deduct TDS before paying your landlord.
Who needs to deduct TDS on rent?
An individual or HUF paying a monthly rent of more than ₹50,000 is liable to deduct 2% TDS on the rent amount u/s 194-IB of the Income Tax Act.
If there are multiple landlords (e.g. co-owners), and your payment to any one of them does not exceed ₹50,000 per month, TDS is not required.
Similarly, if you live in a shared apartment and each tenant’s share of rent is below ₹50,000, then TDS is not applicable.
When to deduct TDS?
TDS csn be deducted once a year at the time of making the last rent payment for the financial year or when your tenancy ends — whichever is earlier.
For example, let’s say you pay ₹70,000 per month as rent for FY 2024-35. Here’s how the TDS will be calculated.
You’ll deduct ₹16,800 as TDS and pay the remaining rent of ₹53,200 to your landlord. The TDS amount then needs to be deposited with the government.
How to deposit the TDS?
Once you deduct the TDS, you need to file Form 26QC and deposit the TDS.
This form needs to be submitted within 30 days from the end of the month in which TDS was deducted.
If you are deducting TDS in March 2025, the due date to file Form 26QC will be 30th April 2025.
After payment, your landlord will see the TDS in their Form 26AS as a tax credit.
How to File Form 26QC from e-Filing Portal?
- Visit the Home | Income Tax Department
- Login using PAN /User Id and Password
- Navigate to e-File > e-Pay Tax
- Click on New Payment tab from the right side
- Scroll down and select the tab “TDS on Sale of Property (Form 26QC)”
- Enter all the required details and make the payment.
What happens if you don’t file the TDS return?
Non-compliance comes with penalties:
- 1% interest per month for failing to deduct TDS.
- 1.5% interest per month for failing to deposit TDS.
- ₹200/day for late filing of Form 26QC (capped at the TDS amount).
A few things to remember:
- If your landlord’s PAN isn’t linked with Aadhaar or is inoperative, TDS will be deducted at 20%.
- TDS is applicable even if your landlord is a relative/NRI.
- In case of rent paid to NRI, Form 27Q needs to be filed and the TDS rate will be 31.2% (including cess). TAN is also mandatory here.
Recently, salaried people who have claimed high HRA exemptions and not paid TDS on rent have been sent out intimations from the ITD. If you have received such an email, we’ve covered the possible solutions in this thread.
If you don’t prefer reading, here’s a video covering the nuances of this topic.