Is TDS applicable on rent paid for a residential house by a salaried employee?

Yes, if a salaried employee (not liable for tax audit) pays rent exceeding ₹50,000 per month, they must deduct TDS at 5% under Section 194IB.

What if rent is paid quarterly or annually, how is the ₹50,000/month limit (Sec 194IB) checked?

The law states '₹50,000 per month or part of a month'. Even if paid quarterly/annually, if the average monthly rent exceeds ₹50,000, TDS is applicable on the total rent paid for the period.

Do I need TAN to deduct TDS on rent under Section 194IB?

No, individuals/HUFs deducting TDS under Section 194IB are not required to obtain TAN. They can use their PAN.

Do I need TAN to deduct TDS on rent paid to an NRI?

Yes, if you pay rent to an NRI, you must obtain TAN to deduct and deposit TDS under Section 195.

Is TDS applicable on maintenance charges paid along with rent?

Generally, yes. If maintenance charges are part of the rental agreement and paid to the landlord, they are typically considered part of 'rent' and are subject to TDS. If paid directly to the society under a separate arrangement, TDS might not apply under rent provisions but other sections could trigger.

What if the landlord is a co-owner? How is TDS handled?

TDS should ideally be deducted proportionately based on each co-owner's share in the property, if known and specified in the agreement. Each co-owner's PAN should be obtained. If shares aren't clear, it's best to seek clarification or deduct on the full amount under one PAN and let co-owners sort it during their ITR.

Is TDS deducted on advance rent? What about refundable security deposit?

Yes, TDS is deductible on advance rent at the time of payment or credit. For TDS on advance rent, the rules are clear. However, TDS is generally not applicable on refundable security deposits, unless it is adjusted against rent in the future.

What is the new TDS threshold for Section 194I from April 1, 2025?

The new threshold for Section 194I, effective April 1, 2025, is if rent paid or credited exceeds ₹50,000 per month (annualized ₹6,00,000).

What is the TDS rate if the landlord does not provide PAN?

If the landlord does not provide their PAN, TDS is generally deducted at 20%.

Can a landlord claim a refund if excess TDS is deducted?

Yes, if the TDS deducted is more than the landlord's actual tax liability, they can claim a refund by filing their Income Tax Return (ITR).

Is TDS applicable on rent paid for furniture and fittings only?

Yes, if rent is paid only for furniture and fittings and it exceeds the threshold under Section 194I (₹50,000/month from April 1, 2025), TDS at 10% is applicable.

What is Form 26QC and who needs to file it?

Form 26QC is a challan-cum-statement for reporting TDS deducted on rent under Section 194IB. The tenant (individual/HUF paying rent over ₹50,000/month and not liable for tax audit) needs to file it.

How can a landlord check if the tenant has deposited the TDS?

A landlord can check their Form 26AS statement available on the income tax portal. Deposited TDS reflects here against their PAN.

What are the consequences if I claimed HRA but didn't deduct TDS when required?

If you were required to deduct TDS under Section 194IB (rent > ₹50,000/month) and didn't, you could face interest, penalties, and notices from the tax department questioning your HRA claim if the landlord's income isn't correctly reported.

Does 'rent' include payments made to a hotel for rooms hired regularly?

Yes, if payments are made to a hotel for accommodation taken on a regular basis (e.g., under an agreement), it can be treated as rent, and TDS under Section 194I may apply if other conditions are met.

TDS on Rent: Your Ultimate Guide to Section 194I, 194IB, Rates & Compliance

Dipali Waghmode
Jul 24
18 min read

Paying or receiving rent above a certain limit? Understanding TDS on rent is incredibly important to steer clear of penalties. Tax Deducted at Source (TDS) on rent is a mechanism where the person paying rent deducts tax before paying the landlord and deposits it with the government. Its purpose is to track rental income and ensure timely tax collection. This guide will furnish a comprehensive, easy-to-understand explanation of all aspects of TDS on rent in India. It includes the latest rules, rates for FY 2025-26 (AY 2026-27), and practical steps for compliance. Readers will learn about TDS (Tax Deducted at Source), Rent, Section 194I, Section 194IB, TDS for NRIs (Section 195), limits, rates, calculation, the payment process, consequences of non-compliance, and recent updates from Budget 2025, effective April 1, 2025.

Table of content

What is TDS on Rent and Why is it Important?
Key Terminologies in TDS on Rent You Should Know
Understanding Section 194I: TDS on Rent
Understanding Section 194IB: TDS on Rent by Individuals/HUF
Section 194IC: TDS on Payment Under Specified Agreement
TDS on Rent Paid to NRI Landlords: Section 195
How to Calculate TDS on Rent?
Depositing TDS and Filing Returns
Issuing TDS Certificates: Form 16A and Form 16C
Consequences of Non-Compliance with TDS on Rent Provisions
When is TDS on Rent NOT Applicable?
Landlord's Perspective: Receiving Rental Income with TDS
Conclusion: Staying Compliant with TDS on Rent
Frequently Asked Questions (FAQs) about TDS on Rent

What is TDS on Rent and Why is it Important?

What is TDS on rent refers to the tax an individual or entity deducts when making rent payments above specified limits. This Tax Deducted at Source (TDS) is then deposited with the government on behalf of the landlord. The purpose of TDS on rent is multifaceted. The government levies TDS on rental income to achieve several objectives.

The importance of TDS on rent includes:

Tracking rental income effectively across the country.
Ensuring timely collection of taxes from rental earnings.
Preventing tax evasion by making it harder to conceal rental income.
Broadening the tax base by bringing more rental transactions into the tax net.

Key sections of the Income Tax Act that govern TDS on rent are Section 194I (for rents paid by entities other than individuals/HUFs not under tax audit), Section 194IB (for rents paid by individuals/HUFs not under tax audit paying high rent), and Section 195 (for rent paid to Non-Resident Indians). Understanding these provisions ensures tax compliance for both tenants and landlords. If you need assistance with TDS return filing, professional help can be beneficial.

Key Terminologies in TDS on Rent You Should Know

To better understand TDS on rent definitions, it's good to know some key terms. These key terms TDS rent will appear throughout this guide.

Payer/Tenant: The person or entity paying the rent and responsible for deducting TDS.
Payee/Landlord: The person or entity receiving the rent, from whose income TDS is deducted.
PAN (Permanent Account Number): A unique ten-digit alphanumeric identifier issued by the Income Tax Department. It's crucial for both the payer and payee for TDS purposes.
TAN (Tax Deduction and Collection Account Number): A ten-digit alphanumeric number required by persons responsible for deducting or collecting tax. Individuals deducting TDS under Section 194IB do not need TAN.
Financial Year (FY): The year in which income is earned. In India, it runs from April 1st to March 31st.
Assessment Year (AY): The year following the Financial Year, in which the income earned in the FY is assessed and taxed.
Rent (as per Income Tax Act): The meaning of rent for TDS under Section 194I covers any payment, by whatever name called, under any lease, sub-lease, tenancy, or any other agreement or arrangement for the use of (either separately or together) any:
- Land
- Building (including factory building)
- Land appurtenant to a building (including factory building)
- Machinery
- Plant
- Equipment
- Furniture
- Fittings

Understanding Section 194I: TDS on Rent

Section 194I TDS on rent applies to specific payers. Any person, other than an individual or a Hindu Undivided Family (HUF) whose accounts are not required to be audited under Section 44AB in the preceding financial year, is liable to deduct TDS under Sec 194I. Individuals or HUFs who are subject to tax audit must also deduct TDS under this section. TDS is deductible under Sec 194I at the time of credit of rent to the account of the payee or at the time of payment, whichever is earlier. For those looking for more details, understanding Section 194I provides further insights.

Crucial Update: Threshold Limit for TDS under Section 194I (Effective April 1, 2025) A significant section 194i amendment has changed the threshold. Effective April 1, 2025, no TDS is required if the rent paid or credited per month is up to ₹50,000 (annualized ₹6,00,000). If the rent exceeds ₹50,000 in any month, TDS becomes applicable on the entire rental amount for the year, not just the excess. It's important to note the shift from an annual threshold to a monthly one for determining applicability. For context, the previous TDS limit section 194i for payments made before April 1, 2025, was ₹2,40,000 per annum.

Feature	Before April 1, 2025	Effective April 1, 2025
Threshold Limit	₹2,40,000 per annum	Rent exceeding ₹50,000 per month

TDS Rates under Section 194I: The TDS rate section 194i depends on the asset type:

For Plant, Machinery, or Equipment: 2%.
For Land, Building (including factory building), Furniture, or Fittings: 10%. This is often relevant for TDS on commercial rent.

No TDS applies if rent is paid to the Government or local authorities.

Impact of PAN: If the landlord's PAN is not provided, the payer must deduct TDS at a higher rate of 20%, as per Section 206AA of the Income Tax Act.

TDS on GST component: TDS is generally not deducted on the GST component if it is shown separately in the invoice. Taxpayers should verify this with current circulars from the Section 194I of Income Tax Act or other official sources.

Understanding Section 194IB: TDS on Rent by Individuals/HUF

Section 194IB TDS on rent applies to individuals or a Hindu Undivided Family (HUF) who are not liable to a tax audit under Section 44AB of the Income Tax Act. This section covers situations where individuals or HUFs pay substantial rent.

TDS under Section 194IB is typically deductible at the time of payment of rent for the last month of the financial year. It can also be deducted in the last month of tenancy if the property is vacated during the year. Alternatively, the payer can choose to deduct it at the time of each payment. The TDS limit section 194IB is triggered if the rent paid exceeds ₹50,000 per month or part of a month. So, if you're making a rent payment above 50000, TDS compliance becomes necessary.

The TDS rate section 194IB is 5% on the total rent paid or credited during the year if the landlord's PAN is provided. Some sources have mentioned a 2% rate, which seems to be an error or specific context not widely applicable for the general rule under 194IB, which is predominantly 5%. Always verify current rates. If the landlord's PAN is not provided, TDS is deducted at 20% under Section 206AA. However, there's a specific nuance: if rent payment is for the whole year and PAN is not furnished, the TDS amount cannot exceed the rent payable for the last month of the tenancy.

A key feature is that the deductor (tenant) under Section 194IB is not required to obtain a TAN (Tax Deduction and Collection Account Number). The deduction is often handled once a year, typically from the rent of the last month of the financial year or tenancy. This simplifies compliance for individuals. If you are an individual paying high rent, understanding these rules is essential when filing your income tax return. You can find more about Section 194IB rules on the official tax portal.

Feature	Section 194I	Section 194IB
Applicability	Primarily entities, and Individuals/HUF liable to tax audit.	Individuals/HUF not liable to tax audit.
Payer	Companies, firms, LLPs, tax-audited Individuals/HUF, etc.	Individuals/HUF not under tax audit.
Rate	2% (Plant & Machinery), 10% (Land, Building, Furniture, etc.)	5% (on Land/Building).
Limit	Rent > ₹50,000/month (from April 1, 2025).	Rent > ₹50,000/month.
TAN Required	Yes	No

Section 194IC: TDS on Payment Under Specified Agreement

Section 194IC TDS deals with a specific scenario different from typical rental agreements. This section applies when a developer makes a monetary payment to a landowner (individual or HUF) under a Joint Development Agreement (JDA). A JDA is an arrangement where the landowner contributes land for a real estate project, and the developer undertakes the construction.

The TDS on joint development agreement payments covered under Section 194IC is levied at a rate of 10%. This TDS is applicable only to the cash component of the compensation paid by the developer to the landowner, not on the portion of the constructed area (kind component) that the landowner might receive. It's important to distinguish this from general rent, as Section 194IC is tailored for these specific JDA transactions between a developer and landowner.

TDS on Rent Paid to NRI Landlords: Section 195

Paying rent to a Non-Resident Indian (NRI) landlord involves specific TDS rules under Section 195 TDS on rent. Any person, whether an individual or an entity, making a rent payment to an NRI is liable to deduct TDS. A crucial point for TDS on rent to NRI is that there is no minimum threshold limit. TDS is applicable from the very first rupee of rent paid.

The general TDS rate NRI landlord payments attract is 30%. Additionally, applicable Surcharge and Health & Education Cess are levied, making the current effective rate often around 31.2% (30% + Surcharge (if any) + 4% Health & Education Cess).

However, the NRI landlord can avail benefits under a DTAA TDS rent provision. If India has a Double Taxation Avoidance Agreement (DTAA) with the country where the NRI resides, the landlord can furnish a Tax Residency Certificate (TRC) and other necessary documents to claim a lower TDS rate as specified in the DTAA. Information on Double Taxation Avoidance Agreements (DTAA) can be found on the tax department's website. Furthermore, an NRI landlord can apply to their Assessing Officer in India for a certificate under Section 197, authorizing a lower or nil rate of TDS.

The tenant's responsibilities are significant:

Obtaining a TAN (Tax Deduction and Collection Account Number) is mandatory for the tenant, irrespective of whether the tenant is an individual or an entity.
The tenant must file Form 15CA online, which is a declaration for remittances made to non-residents.
If the total remittances to the NRI during the financial year exceed ₹5 lakh (this limit can change, verify current rules), the tenant also needs to obtain a certificate from a Chartered Accountant in Form 15CB before filing Form 15CA. The form 15ca rent and form 15cb rent are essential compliances.
The TDS amount must be deposited with the government using the appropriate challan.
A quarterly TDS return in Form 27Q must be filed.
The tenant must issue Form 16A (TDS certificate) to the NRI landlord.

For individuals dealing with such payments, considering NRI taxation services can be helpful.

Feature	Resident Landlord (Sec 194I/194IB)	NRI Landlord (Sec 195)
Applicable Section	194I or 194IB	195
Threshold Limit	Yes (e.g., ₹50k/month)	No threshold, TDS from ₹1.
General TDS Rate	2%/10% (194I), 5% (194IB)	~31.2% (30% + Surcharge + Cess).
TAN for Tenant	Yes (194I), No (194IB)	Mandatory for all tenants.
Forms by Tenant	Form 26QC (194IB) etc.	Form 15CA, 15CB (if applicable), 27Q.

How to Calculate TDS on Rent?

To calculate TDS on rent, one needs to know the rent amount, applicable TDS section, and the correct TDS rate. Here are a few TDS on rent example scenarios demonstrating the TDS calculation formula rent.

Scenario 1 (Sec 194I): Company paying monthly rent of ₹70,000 for office space (Land/Building) - Effective April 1, 2025.

Monthly Rent: ₹70,000
Since the monthly rent exceeds ₹50,000, Section 194I applies.
Applicable TDS Rate (Land/Building): 10%.
Annual Rent: ₹70,000 x 12 = ₹8,40,000
TDS per month: ₹70,000 x 10% = ₹7,000
TDS for the year: ₹8,40,000 x 10% = ₹84,000 The company will deduct ₹7,000 each month from the rent payable.

Scenario 2 (Sec 194I): Firm paying monthly rent of ₹20,000 for machinery.

Monthly Rent: ₹20,000
As of April 1, 2025, the new threshold for Sec 194I is rent exceeding ₹50,000 per month.
Since the monthly rent of ₹20,000 for machinery is below ₹50,000, no TDS is required under Section 194I.
Prior to April 1, 2025 (old rule for context): If annual rent was ₹2,40,000 (i.e., ₹20,000 x 12) and it did not exceed ₹2,40,000, no TDS. If it exceeded, TDS @ 2% would apply.

Scenario 3 (Sec 194IB): Salaried individual paying monthly house rent of ₹60,000.

Monthly Rent: ₹60,000
Since the rent exceeds ₹50,000 per month and the payer is a salaried individual (not liable to tax audit), Section 194IB applies.
Applicable TDS Rate: 5%.
Annual Rent: ₹60,000 x 12 = ₹7,20,000
Total TDS for the year: ₹7,20,000 x 5% = ₹36,000
This TDS is typically deducted from the rent paid for the last month of the financial year or the last month of tenancy. So, from the rent of the last month, ₹36,000 would be deducted.

Scenario 4 (Sec 195 - NRI): Individual paying monthly house rent of ₹40,000 to an NRI landlord.

Monthly Rent: ₹40,000
TDS is applicable from Re. 1 for rent paid to NRIs under Section 195.
Applicable TDS Rate (assuming no DTAA benefit): 31.2% (30% basic + 4% Health & Education Cess on TDS).
TDS per month: ₹40,000 x 31.2% = ₹12,480.
The tenant must deduct ₹12,480 each month.

Scenario with no PAN provided by landlord (20% TDS): If a landlord (resident) does not provide PAN:

Under Section 194I: If monthly rent is ₹70,000 (Scenario 1), TDS would be ₹70,000 x 20% = ₹14,000 per month.
Under Section 194IB: If monthly rent is ₹60,000 (Scenario 3), total annual TDS would be ₹7,20,000 x 20% = ₹1,44,000. However, for Sec 194IB, the TDS cannot exceed the rent payable for the last month. This nuance needs careful handling; usually, the 20% on total annual rent is deducted, capped at the last month's rent. Professional advice is best here.

Knowing how much TDS on rent to deduct is crucial for compliance.

Depositing TDS and Filing Returns

The process of how to pay TDS on rent and subsequent return filing is a critical compliance step.

Obtaining TAN (if applicable): A Tax Deduction and Collection Account Number (TAN) is required by all persons who deduct TDS. However, individuals and HUFs deducting TDS under Section 194IB are exempt from obtaining TAN; they can use their PAN. For others (deducting under Sec 194I or 195), TAN is mandatory.

Payment of TDS:

TDS deducted must be deposited with the government using Challan ITNS 281 for payments under Section 194I and Section 195.
The TDS payment due date is generally the 7th of the next month. For TDS deducted in March, the due date is April 30th.
Payments can be made online through the Income Tax portal or the NSDL website.

Filing TDS Statement/Return: Different forms are prescribed for filing TDS returns based on the applicable section:

Form 26QC (for Sec 194IB):
- Who files: The tenant (Individual/HUF not under tax audit) who deducts TDS under Sec 194IB.
- Due Date: Within 30 days from the end of the month in which TDS was deducted (which is typically the last month of the FY or tenancy).
- Details required: Tenant's PAN, Landlord's PAN, property details, rent details, and TDS amount.
- How to file form 26qc online: This challan-cum-statement is filed online through the Income Tax Department's portal.

Form 24Q/26Q (for Sec 194I by corporates/firms etc.):
- These are regular quarterly TDS returns. Form 26Q is used for TDS on payments other than salary, including rent under Sec 194I.
- Due Dates: Quarterly (e.g., July 31, Oct 31, Jan 31, May 31).

Form 27Q (for Sec 195 - NRI TDS):
- Who files: The payer (tenant) of rent to an NRI.
- Due Dates: Quarterly (e.g., July 31 for Apr-Jun, Oct 31 for Jul-Sep, Jan 31 for Oct-Dec, May 31 for Jan-Mar).
- How to file: This statement is also filed online. This is a key part of form 27q filing.

For a general understanding, you can find resources on how to file TDS returns online.

Issuing TDS Certificates: Form 16A and Form 16C

Issuing a TDS certificate for rent to the landlord is a mandatory step after deducting and depositing TDS. This certificate acts as proof of tax deduction for the landlord.

Form 16C (for TDS under Sec 194IB):

Form 16C is issued by the tenant (Individual/HUF not liable for tax audit) to the landlord after deducting TDS under Section 194IB.
The due date for form 16c is within 15 days from the due date of furnishing Form 26QC.
Tenants can download Form 16C from the TRACES portal after filing Form 26QC. Getting a form 16c download is straightforward from the portal.

Form 16A (for TDS under Sec 194I and Sec 195):

Form 16A for rent TDS is issued by the payer (Company, Firm, or any person deducting TDS under Section 194I or Section 195) to the landlord.
The due date for issuing Form 16A is within 15 days from the due date of filing the quarterly TDS returns (Form 26Q for Sec 194I, Form 27Q for Sec 195).
Payers can also download Form 16A from the TRACES portal.

These certificates are very important for the landlord. They allow the landlord to claim credit for the tax already deducted from their rental income when filing their income tax return. It serves as concrete proof of the tax deduction made by the tenant.

Consequences of Non-Compliance with TDS on Rent Provisions

Failure to comply with TDS on rent provisions can lead to several consequences of tds default, including interest and penalties. It's crucial to avoid any tds notice for rent by ensuring adherence to the rules.

Interest for Late Deduction of TDS (Sec 201(1A)): If TDS is not deducted or deducted late, interest at 1% per month or part of the month is levied from the date TDS was deductible to the date it is actually deducted.
- Example: If TDS of ₹5,000 was deductible on June 7th but deducted on August 10th, interest for 3 months (June, July, August) would be ₹5,000 x 1% x 3 = ₹150.

Interest for Late Payment of TDS (after deduction) (Sec 201(1A)): If TDS is deducted but paid late to the government, interest at 1.5% per month or part of the month is levied from the date of deduction to the date of actual payment.
- Example: If TDS of ₹5,000 was deducted on June 7th (due July 7th) but paid on September 15th, interest from June 7th to September 15th (4 months - June, July, Aug, Sep) would be ₹5,000 x 1.5% x 4 = ₹300.

Late Filing Fee for TDS Returns (Sec 234E): For late filing of TDS returns like Form 26QC or Form 27Q, a fee of ₹200 per day of default is applicable. This fee is subject to a maximum of the TDS amount.
- Example: If Form 26QC (TDS amount ₹3,000) is due by April 30th but filed on May 10th (10 days delay), late fee would be ₹200 x 10 = ₹2,000.

Penalty for Non-Filing/Incorrect Filing of TDS Returns (Sec 271H): A penalty ranging from a minimum of ₹10,000 up to ₹1,00,000 can be levied for non-filing or incorrect filing of TDS statements.

Penalty for Non-Deduction/Short Deduction (Sec 271C): A penalty equal to the amount of tax not deducted or short-deducted can be imposed.

Prosecution (Sec 276B): If a person fails to pay the TDS to the credit of the Central Government after deducting it, they can face prosecution. This may involve rigorous imprisonment for a term ranging from 3 months to 7 years, along with a fine.

Disallowance of Rent Expenditure: For businesses, if TDS on rent is not deducted as required, 30% of such rent expenditure can be disallowed under Section 40(a)(ia) while computing business income.

Recently, the Income Tax department has been proactive in sending notices related to HRA claims where corresponding TDS by tenants (under Sec 194IB) might have been missed. If you receive such a notice, knowing how to proceed with responding to an income tax notice is important. Understanding the penalty for not deducting tds on rent and interest on late payment of tds on rent underscores the need for diligence.

Default	Section	Consequence
Late Deduction of TDS	201(1A)	Interest @ 1% per month/part month.
Late Payment of TDS (after deduction)	201(1A)	Interest @ 1.5% per month/part month.
Late Filing of TDS Return	234E	₹200 per day (max. TDS amount).
Non-Filing/Incorrect TDS Return	271H	Penalty ₹10,000 to ₹1,00,000.
Non-Deduction/Short Deduction of TDS	271C	Penalty equal to TDS not/short deducted.
Failure to Pay TDS to Govt after Deducting	276B	Imprisonment (3 months to 7 years) + Fine.
Non-Deduction by Businesses	40(a)(ia)	30% of rent expenditure disallowed.

When is TDS on Rent NOT Applicable?

There are specific situations providing TDS exemption on rent, outlining when TDS on rent is not applicable. Understanding these no TDS on rent conditions is important.

TDS on rent is generally not required in the following cases:

The rent payment falls below the specified threshold limits. For Section 194I, this means rent is not exceeding ₹50,000 per month (effective April 1, 2025). For Section 194IB, if the rent paid by an individual/HUF (not under tax audit) is up to ₹50,000 per month, TDS is not applicable.
Under Section 194I, if the payer is an individual or HUF whose accounts are not required to be audited under Section 44AB in the preceding financial year. However, if such an individual/HUF pays rent exceeding ₹50,000 per month, Section 194IB would then become applicable.
When rent is paid to the Government, Reserve Bank of India (RBI), Mutual Funds specified under Section 10(23D), or certain other statutory bodies or local authorities. It's always good to verify the complete list of exempted entities.
If the tenant has obtained a certificate for lower or nil TDS for the landlord under Section 197 of the Income Tax Act from the Assessing Officer. The tenant should then deduct TDS at the rate specified in that certificate.
Regarding security deposits, TDS is generally not applicable on refundable security deposits. However, if a non-refundable security deposit is paid, or if a refundable deposit is later adjusted against rent, TDS becomes applicable at that point.
A specific exemption exists for rent payments related to film exhibition between a film distributor and a film exhibitor who owns a cinema theatre.

Landlord's Perspective: Receiving Rental Income with TDS

From the TDS on rent landlord perspective, understanding how Tax Deducted at Source affects rental income is key. When a tenant deducts TDS, the landlord receives the net rent (gross rent minus TDS).

Landlords should be aware of the following:

Verifying TDS Deduction: Landlords can verify if the tenant has deducted and deposited the TDS by checking their Form 26AS. Form 26AS rental income details will reflect the TDS credited against their PAN.

Claiming TDS Credit: The TDS amount reflected in Form 26AS can be claimed as a credit against the landlord's total tax liability when they file their Income Tax Return (ITR).

What if tenant deducts TDS but doesn't deposit it?: This is a tricky situation. If the tenant has deducted TDS but not deposited it with the government, it will not appear in the landlord's Form 26AS. The landlord should communicate with the tenant to ensure deposit and filing. If issues persist, the landlord may need to report the matter to the Income Tax Department. The primary liability to deposit TDS lies with the deductor (tenant).

Importance of providing PAN: It is crucial for landlords to provide their PAN to the tenant. If PAN is not provided, the tenant will deduct TDS at a higher rate of 20%.

Understanding Form 16A/16C: Landlords will receive Form 16A (from payers under Sec 194I/195) or Form 16C (from tenants under Sec 194IB) from their tenants. These forms are TDS certificates and serve as proof of the tax deducted. These are important documents for filing ITR and claiming credit. Landlords should ensure they receive these certificates.

For assistance, landlords can explore services related to checking your Form 26AS and ITR filing.

Conclusion: Staying Compliant with TDS on Rent

Ensuring TDS on rent compliance is vital for both tenants and landlords. This guide has highlighted the key aspects of TDS rules, particularly Sections 194I, 194IB, and 195. It's important to know the correct TDS rates, applicable thresholds, and the procedures for timely deduction, deposit, and filing of returns.

A significant takeaway is the recent update from Budget 2025: the threshold for Section 194I has been revised to ₹50,000 per month, effective April 1, 2025. Staying informed about such changes is crucial. Proactive compliance helps to avoid TDS penalty rent related issues and ensures smooth financial processing for everyone involved. If you need help with TDS compliance or tax planning, you can always Contact TaxBuddy experts for taxbuddy tds help.

Frequently Asked Questions (FAQs) about TDS on Rent

Is TDS applicable on rent paid for a residential house by a salaried employee?
Yes, if a salaried employee (not liable for tax audit) pays rent exceeding ₹50,000 per month, they must deduct TDS at 5% under Section 194IB.
What if rent is paid quarterly or annually, how is the ₹50,000/month limit (Sec 194IB) checked?
The law states "₹50,000 per month or part of a month". Even if paid quarterly/annually, if the average monthly rent exceeds ₹50,000, TDS is applicable on the total rent paid for the period.
Do I need TAN to deduct TDS on rent under Section 194IB?
No, individuals/HUFs deducting TDS under Section 194IB are not required to obtain TAN. They can use their PAN.
Do I need TAN to deduct TDS on rent paid to an NRI?
Yes, if you pay rent to an NRI, you must obtain TAN to deduct and deposit TDS under Section 195.
Is TDS applicable on maintenance charges paid along with rent?
Generally, yes. If maintenance charges are part of the rental agreement and paid to the landlord, they are typically considered part of 'rent' and are subject to TDS. If paid directly to the society under a separate arrangement, TDS might not apply under rent provisions but other sections could trigger.
What if the landlord is a co-owner? How is TDS handled?
TDS should ideally be deducted proportionately based on each co-owner's share in the property, if known and specified in the agreement. Each co-owner's PAN should be obtained. If shares aren't clear, it's best to seek clarification or deduct on the full amount under one PAN and let co-owners sort it during their ITR.
Is TDS deducted on advance rent? What about refundable security deposit?
Yes, TDS is deductible on advance rent at the time of payment or credit. For TDS on advance rent, the rules are clear. However, TDS is generally not applicable on refundable security deposits, unless it is adjusted against rent in the future.
What is the new TDS threshold for Section 194I from April 1, 2025?
The new threshold for Section 194I, effective April 1, 2025, is if rent paid or credited exceeds ₹50,000 per month (annualized ₹6,00,000).
What is the TDS rate if the landlord does not provide PAN?
If the landlord does not provide their PAN, TDS is generally deducted at 20%.
Can a landlord claim a refund if excess TDS is deducted?
Yes, if the TDS deducted is more than the landlord's actual tax liability, they can claim a refund by filing their Income Tax Return (ITR).
Is TDS applicable on rent paid for furniture and fittings only?
Yes, if rent is paid only for furniture and fittings and it exceeds the threshold under Section 194I (₹50,000/month from April 1, 2025), TDS at 10% is applicable.
What is Form 26QC and who needs to file it?
Form 26QC is a challan-cum-statement for reporting TDS deducted on rent under Section 194IB. The tenant (individual/HUF paying rent over ₹50,000/month and not liable for tax audit) needs to file it.
How can a landlord check if the tenant has deposited the TDS?
A landlord can check their Form 26AS statement available on the income tax portal. Deposited TDS reflects here against their PAN.
What are the consequences if I claimed HRA but didn't deduct TDS when required?
If you were required to deduct TDS under Section 194IB (rent > ₹50,000/month) and didn't, you could face interest, penalties, and notices from the tax department questioning your HRA claim if the landlord's income isn't correctly reported.
Does "rent" include payments made to a hotel for rooms hired regularly?
Yes, if payments are made to a hotel for accommodation taken on a regular basis (e.g., under an agreement), it can be treated as rent, and TDS under Section 194I may apply if other conditions are met.