Paying Rent Above ₹50,000? Deduct TDS or Face Tax Trouble

If you’re paying house rent over ₹50,000 a month, the Income Tax Department now requires you to deduct TDS (Tax Deducted at Source) before paying your landlord. This is part of Section 194-IB of the Income Tax Act and helps the government keep track of rental income.

What Does the Rule Say?

As per Section 194-IB:

• If you’re an individual or part of a Hindu Undivided Family (HUF) paying monthly rent above ₹50,000, you must deduct TDS before paying rent.
• This applies to any rental agreement—lease, sub-lease, or tenancy for land or buildings.
• The TDS must be deducted in the last month of the financial year or the last month of the tenancy, whichever comes earlier.

TDS Rate and Deadline

• Before Oct 1, 2024: TDS rate is 5%
• From Oct 1, 2024 (AY 2025–26): TDS rate has been reduced to 2%
• You must deposit the deducted TDS using Form 26QC within 30 days from the end of the month when rent is paid.
• After this, you must issue Form 16C (TDS certificate) to your landlord within 15 days.

What Happens if You Don’t Deduct TDS?

If you fail to deduct or deposit TDS, you could:

• Be treated as an “assessee in default.”
• Be charged 1% interest per month for not deducting TDS.
• Face 1.5% interest per month for not depositing deducted TDS.
• Be fined ₹200 per day for late filing.
• Face penalties of up to ₹1 lakh under Section 271H
• Be liable to pay the entire TDS amount yourself.

Important for Those Claiming HRA

Even if you’re claiming House Rent Allowance (HRA), you still have to deduct TDS if rent exceeds ₹50,000 per month. Claiming HRA doesn’t exempt you from this rule.

Documents You Should Keep

To stay safe from penalties:

• Keep a copy of the rent agreement
• Maintain rent receipts
• Save TDS payment proofs

These will help in case of any future tax scrutiny.

How to Fill Form 26QC (Online)

You can submit Form 26QC online in these simple steps:

1. Go to www.tin-nsdl.com
2. Under ‘Services’, choose TDS on Property (194IA)
3. Select Form 26QC and click on the option to fill the form
4. Enter:
   • Buyer’s PAN
   • Seller’s PAN
5. Fill in property details:
   • Date of transaction
   • Total sale value
   • Type of payment (full/instalment)
   • Property type (residential/commercial)
6. Enter payment and bank details
7. After submitting, you’ll get an acknowledgement receipt and Challan Identification Number (CIN)—keep this for your records.

Conclusion

Understanding and following TDS rules under Section 194-IB is essential if you’re paying high rent. Timely deduction, deposit, and documentation can save you from hefty fines and ensure smooth tax compliance. When in doubt, consult a tax professional to stay on the right side of the law.

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