House Rent above 50,000? Here’s the TDS Rule You Need to Know
Paying high monthly rent in India can come with an easy-to-overlook, but critical, tax obligation. If you are paying more than ₹50,000 per month in rent, you need to be aware of TDS on rent under Section 194-IB of the Income Tax Act. This provision doesn’t just apply to businesses—even salaried tenants and individuals must comply.
Understanding Section 194-IB of the Income Tax Act
Section 194-IB was introduced to bring high-value rental payments within the TDS framework and improve tax compliance. According to this section, any individual or Hindu Undivided Family (HUF) (other than those liable for tax audit) who pays monthly rent exceeding ₹50,000 is required to deduct tax at source (TDS) at the rate of 5%.
This provision is often misunderstood. Many people believe TDS on rent applies only to businesses or those who undergo tax audits. In fact, it is specifically designed to cover individuals, including salaried employees and self-employed professionals, when their rent crosses the ₹50,000 threshold.
How and When to Deduct TDS on Rent
The law requires that the TDS deduction is made only once in a financial year—either in the month of March or in the last month of the tenancy if the rental agreement ends earlier. For example, if your tenancy runs April to March, you can make the deduction in March.
Once the deduction is made, the tenant must file Form 26QC, which is a challan-cum-statement for TDS on rent, within 30 days. The tenant must also provide Form 16C (TDS certificate) to the landlord as proof of tax deducted and deposited.
These steps are mandatory and ensure the landlord can claim credit for the TDS while filing their income tax return.
Common Mistakes and Real-Life Cases
Despite clear rules, many tenants remain unaware of their obligations. Consider the case of Abhishek, a salaried individual who paid ₹55,000 per month in rent but failed to deduct TDS. As highlighted by TaxGyany.com, he was penalised ₹1,00,000 by the Income Tax Department.
Another example is Rohan, who paid ₹60,000 monthly rent since April 2022 but did not deduct or deposit TDS for two financial years. When he finally complied in April 2025, he had to pay ₹37,000 in late fees and interest—more than the TDS amount itself.
These cases underscore how overlooking TDS obligations on rent can turn routine payments into significant financial liabilities.
Penalties for Non-Compliance
The consequences of failing to comply with Section 194-IB can be harsh:
- Late filing of Form 26QC can attract a fee of ₹200 per day under Section 234E, capped at the TDS amount.
- Interest under Section 201(1A) applies at 1% per month for failure to deduct and 1.5% per month for failure to deposit TDS.
- Penalty under Section 271H can range from ₹10,000 to ₹1,00,000.
- Prosecution is possible under Section 276B, with a jail term of three months to seven years in extreme cases.
Clearly, missing this obligation is not just a minor error—it can lead to steep fines and even criminal consequences.
How to Comply Easily
The Income Tax Department has made the process straightforward through its online portal:
- Deduct 5% TDS on the rent paid in March (or last month of tenancy).
- File Form 26QC online within 30 days.
- Pay the TDS amount via net banking or at authorised banks.
- Download and provide Form 16C to your landlord.
This streamlined system aims to make compliance accessible even for individual taxpayers without accounting backgrounds.
Broader Context: Personal Payment TDS Provisions
Section 194-IB is not the only TDS rule for personal transactions. Other sections include:
- Section 194-IA: 1% TDS on property purchases above ₹50 lakh.
- Section 194M: 5% TDS on personal payments exceeding ₹50 lakh to contractors, professionals, or agents.
- Section 194S: 1% TDS on peer-to-peer crypto transactions.
These provisions reflect a broader government focus on tracking high-value transactions to curb tax evasion.
Conclusion: Don’t Ignore TDS on Rent
For tenants in high-rent urban markets, the ₹50,000 threshold is easily crossed. Section 194-IB ensures such transactions are brought into the formal tax net. Ignoring this rule can lead to penalties far exceeding the TDS amount itself.
If you’re paying rent above ₹50,000 per month, ensure you deduct and deposit TDS, file Form 26QC, and issue Form 16C to your landlord. It is a simple, necessary step to remain tax-compliant and avoid costly mistakes.