TDS on Rent: Section 194-IB Explained for Individuals and HUFs

Section 194-IB applies specifically to individuals and HUFs who aren’t otherwise required to deduct TDS under Section 194-I — in practice, tenants who don’t fall under a tax audit. If your rent for any property exceeds ₹50,000 a month, you’re required to deduct TDS, even though you’re a tenant and not a business.

How much to deduct, and when

The TDS rate under 194-IB is 2% (reduced from 5% for payments made on or after 1 October 2024). It’s deducted once a year — at the time of credit or payment for the last month of the financial year, or the last month of the tenancy if you vacate partway through the year, whichever is earlier. You don’t deduct TDS every month; it’s a single deduction covering the full year’s rent.

Filing and payment — no TAN required

Unlike most TDS provisions, 194-IB doesn’t require the tenant to obtain a TAN. The tax deducted is deposited using Form 26QC, a combined challan-cum-statement, within 30 days from the end of the month in which the deduction was made. After payment, you issue Form 16C to the landlord as the TDS certificate.

What happens if you miss it

• Interest for late deduction: 1% per month from the date TDS was deductible to the date it’s actually deducted
• Interest for late deposit: 1.5% per month from the date of deduction to the date of deposit
• Late filing fee for Form 26QC: ₹200 per day of delay, up to the TDS amount

Because this is easy to overlook — most tenants don’t think of themselves as a “deductor” — it’s one of the more common compliance gaps we catch during personal tax reviews. If your monthly rent is close to or above ₹50,000, it’s worth checking whether this applies to you before the financial year closes.