TDS on Rent: Claim Your Refund If You Paid 5% Instead of 2% on House Rent

Starting October 1, 2024, a key rule change brought relief to thousands of tenants paying high rents: the TDS (Tax Deducted at Source) rate on house rent payments exceeding ₹50,000 per month was slashed from 5% to 2%.

However, widespread confusion has now surfaced. Many tenants, unaware of the new lower rate, continued deducting TDS at 5% into 2025, leading to excess deductions that are causing friction between landlords and tenants alike.

With the financial year 2024-25 officially closed, taxpayers are scrambling to fix these TDS errors. If you have over-deducted TDS from your rent payments, there’s now a clear way to claim a refund from the Income Tax Department through the TRACES portal.

Here’s a quick guide based on the latest steps issued by the department:

Why the TDS Confusion Happened?

Until September 30, 2024, tenants had to deduct 5% TDS on rent payments exceeding ₹50,000 monthly under Section 194IB of the Income Tax Act.

From October 1, 2024, this rate was officially reduced to 2% to ease tenant cash flows.

Yet, due to delayed updates in TDS software tools and low awareness, many continued deducting at the old 5% rate even after the cut — meaning an extra 3% TDS amount is now stuck.

Adding to the mess, even landlords’ Form 26AS is reflecting TDS credit only for 2% — leaving the excess 3% in limbo.

What Are Your Options If You Deducted Excess TDS?

You essentially have two options:

• Negotiate with your landlord to adjust future rent payments by the excess TDS amount.

• Apply for a refund of the extra TDS directly from the Income Tax Department if adjustment isn’t possible.

Given that many landlords prefer not to complicate rental receipts, claiming a refund is quickly becoming the preferred route.

How to Claim Excess TDS Refund on TRACES Portal

The Income Tax Department has recently issued an e-tutorial for this. Here’s the latest step-by-step process:

• Login to the TRACES portal.

• Navigate to “Statement Payment” > “Request for Refund”.

• Check the Refund Checklist carefully and click “Proceed”.

• Section code (“Refund Request for Challan other than sec. 195”) and reason for refund.

• Add the Challan details for the excess TDS deducted.

• Provide your bank account details for receiving the refund.

• Complete the Verification and Confirmation pages.

• Upload your Digital Signature Certificate (DSC).

• Submit Form 26B Acknowledgement to the Assessing Officer within 14 days.

• Track your application under the “Track Refund Request” tab.

Important: If the refund amount exceeds ₹50 lakh, it will require Additional Commissioner (ADC) approval.

What Are the Key Conditions for a Successful Refund Claim?

• No outstanding tax demand against your TAN or PAN.

• A maximum of five challans can be included per refund request.

• The unclaimed amount should be greater than ₹100 per challan.

• Digital Signature is mandatory for submission.

• Ensure all earlier TDS statements are processed and corrected, if required.

Read More: Paying Rent to Family? Here’s How to Stay Out of the Income Tax Department’s Radar in FY 2025-26.

Conclusion

Given the confusion created by the TDS rate cut effective from October 2024, tenants must act quickly to rectify mistakes.

With landlords unable to claim credit for anything beyond 2% (despite higher deductions), following the official refund procedure on TRACES is the cleanest and safest method to recover your excess TDS.

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