TDS on Rent in India: When Tenants Must Deduct and What Landlords Must Know
Published 30 June 2026 · GST & TDS
Kavitha moved to Bengaluru from Coimbatore for a new job. She found a 3BHK in Koramangala at ₹55,000/month and pays by bank transfer on the 1st of every month. Six months in, a colleague mentioned that Kavitha might have a TDS obligation as the tenant. Kavitha assumed TDS was something only companies and employers dealt with. She was wrong — and she had already missed five monthly payments without filing anything.
Section 194IB: The Rule That Applies to Kavitha
Section 194IB was introduced in 2017 specifically to capture individual and HUF tenants who were paying high rents but had no TDS obligation. The threshold is clear: if your monthly rent exceeds ₹50,000, you must deduct TDS.
Kavitha's rent is ₹55,000 — above the threshold. The TDS rate under Section 194IB is 2% of the annual rent. Kavitha's annual rent = ₹55,000 × 12 = ₹6,60,000. TDS = 2% of ₹6,60,000 = ₹13,200. That ₹13,200 belongs to the government, not the landlord.
Unlike Section 194I (which applies to companies and requires monthly or quarterly deduction), Section 194IB for individuals is a one-time annual deduction. Kavitha deducts the full ₹13,200 once — in March, or in the month when the tenancy ends, whichever comes first.
What Kavitha Must Do in March
In March, instead of paying the full ₹55,000 rent, Kavitha pays her landlord ₹55,000 − ₹13,200 = ₹41,800 for that month's rent. She keeps ₹13,200 separately. Within 30 days from the end of March (i.e., by April 30), she deposits ₹13,200 to the government using Form 26QC — not Challan 280. Form 26QC is filed on the TIN-NSDL portal or the Income Tax e-filing portal. No TAN is required; Kavitha uses her PAN.
Within 15 days of depositing the TDS, Kavitha must issue Form 16C to her landlord. This certificate shows the landlord how much TDS was deducted and deposited on their behalf. The landlord then claims this credit when filing their own ITR.
The landlord cannot simply demand the full ₹55,000 in March. After Form 26QC is filed, the ₹13,200 credit appears in the landlord's Form 26AS. If Kavitha's landlord insists on full payment without TDS deduction, Kavitha remains legally liable as the one required to deduct and deposit — the landlord's cooperation does not alter her obligation.
Section 194I vs Section 194IB: Side-by-Side
| Feature | Section 194I (Business) | Section 194IB (Individual/HUF) |
|---|---|---|
| Threshold | ₹2.4L/year | ₹50,000/month |
| Rate (buildings) | 10% | 2% |
| Rate (plant & machinery) | 2% | N/A |
| Deduction frequency | Quarterly | Once (March or lease end) |
| TDS form | 26Q | 26QC |
| TAN required | Yes | No (use PAN) |
| Certificate to landlord | Form 16A | Form 16C |
Run this for your own numbers
Calculate TDS on Rent →What Most Tenants Get Wrong About TDS on Rent
The most common error is assuming TDS on rent is a corporate obligation. Section 194IB was introduced specifically because high-rent residential tenancies were escaping the TDS net entirely. A software engineer in Bengaluru paying ₹65,000/month for a 3BHK has the same Section 194IB obligation as any business tenant paying above the threshold.
The second error: failing to file Form 26QC because the landlord refuses to give their PAN. The tenant's obligation exists regardless. If the landlord does not provide PAN, TDS must still be deducted — at the higher rate of 20% under Section 206AA instead of 2%. That makes it even more important to collect the landlord's PAN upfront.
When Kavitha fails to deduct and deposit TDS, she becomes a "deemed assessee in default" under Section 201. Interest accrues at 1% per month on the amount that should have been deducted. The landlord still pays tax on the full rent — the TDS obligation does not disappear, it just becomes Kavitha's liability.
Frequently Asked Questions
When must a tenant deduct TDS on rent in India?
Section 194IB: Individuals and HUFs paying rent above ₹50,000/month must deduct 2% TDS. This is a one-time annual deduction (not monthly) taken in March or when the lease ends. Section 194I: Companies and businesses paying rent above ₹2.4L/year must deduct 10% TDS on building rent, 2% on plant and machinery rent.
What is the TDS rate on rent in India?
Section 194IB (individuals paying rent > ₹50K/month): 2% on full annual rent. Section 194I (companies/businesses): 10% for building/land/furniture rent if total exceeds ₹2.4L in the year, 2% for plant and machinery rent.
What if the tenant fails to deduct TDS on rent?
The tenant becomes a "defaulter" under Section 201. Consequences: interest at 1% per month on the undeducted amount plus 1.5% per month on the deducted but not deposited amount. The expense may also be disallowed up to 30% of the payment for income tax purposes for business tenants.
Does TDS on rent apply if I pay rent in cash?
TDS obligations apply regardless of payment mode — cash, cheque, NEFT, UPI. However, business expense claims above ₹10,000 in cash may be disallowed under Section 40A(3). For individuals, TDS under 194IB must still be deducted even if paying cash, but cash transactions above certain limits trigger separate scrutiny.
How do I deposit TDS on rent as a tenant?
Section 194IB tenants (individuals): Use Form 26QC (not Challan 280) on the TIN-NSDL or Income Tax portal. Deposit within 30 days from the end of the month in which TDS is deducted (typically March = deposit by April 30). Issue Form 16C to the landlord within 15 days of deposit. Companies filing quarterly TDS: use Form 26Q.
Is your monthly rent above ₹50,000 — and have you filed Form 26QC for this financial year?