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TDS on Rent: How to Get a Refund for Excess TDS Deducted from House Rent Payments (Post October 1, 2024)

If you’re a tenant paying house rent above ₹50,000 per month, you are required to deduct Tax Deducted at Source (TDS) before paying rent to your landlord under Section 194IB of the Income Tax Act. Effective October 1, 2024, the TDS rate was reduced from 5% to 2%. However, due to a lack of awareness, many tenants continued to deduct 5% TDS, leading to excess TDS being deposited.

This blog explains how to claim a refund for the excess TDS deducted on rent and how landlords can deal with this issue if they receive credit for only 2%.

🔍 Background: TDS on Rent under Section 194IB

Applicable to: Individual or HUF tenants (not liable to tax audit)
Rent exceeding: ₹50,000/month
TDS rate:
- 5% till September 30, 2024
- 2% from October 1, 2024 onwards

❗️The Problem: TDS Deducted at 5% Post October 1, 2024

Due to the recent rate change, many tenants mistakenly continued to deduct 5% TDS even after the rate was lowered to 2%. As a result:

Landlords received credit of only 2% in their Form 26AS
The remaining 3% TDS is held in suspense
Tenants cannot adjust the extra TDS for a different financial year
In many cases, landlords are unable or unwilling to adjust this excess with future rent payments

🧾 Solution: Claim a Refund for Excess TDS Deducted

According to the Income Tax Department’s TRACES e-tutorial, only TDS deductors (i.e. tenants) can apply for a refund of excess TDS via the TRACES portal.

Source:
➡️ TRACES Refund e-Tutorial (PDF)

🧭 Step-by-Step Guide: How to Apply for TDS Refund on TRACES

✅ Step 1: Log in to TRACES Portal

Use your TAN credentials to log in.

✅ Step 2: Navigate to:

Statement / Payment → Request for Refund

✅ Step 3: Review the refund checklist and click “Proceed”

✅ Step 4: Select Section and Reason

Choose:

Refund Request for Challan other than sec. 195
Select a valid reason for refund (e.g. “Excess TDS Deducted”)
Click on “Add Challan”

✅ Step 5: Enter Challan & Scheme Details

Provide:

Challan details
Whether the refund relates to an appeal order or Vivad Se Vishwas Scheme
Enter order numbers if applicable

✅ Step 6: Enter Bank Account Details

Ensure bank account is linked to the TAN holder’s profile.

✅ Step 7: Submit Refund Request

Click on “Submit Refund Request”

✅ Step 8: Upload Digital Signature Certificate (DSC)

A valid DSC must be registered on TRACES to proceed.

✅ Step 9: Submit Form 26B Acknowledgement

Submit the Form 26B to your Assessing Officer within 14 days.
Note: If refund amount exceeds ₹50 lakh, it will be forwarded to Additional Commissioner for approval.

✅ Step 10: Track Refund Status

Go to: Statement / Payment → Track Refund Request

Use:

Option 1: TAN & financial year
Option 2: Refund request number
To view the status and remarks.

📌 Important Rules for Claiming Refund

DSC of authorized person must be registered
PAN of Deductor should match TAN master
No outstanding tax demands should exist against PAN/TAN
Refund request can include maximum 5 challans
Each challan must have unclaimed balance > ₹100
Refund amount cannot exceed unclaimed balance
All TDS statements involving the challan must be processed first

🤔 Why is the Landlord Seeing Only 2% TDS in Form 26AS?

Despite actual TDS deposited at 5%, landlords see only 2% reflected in their Form 26AS post October 2024. According to CA Mayank Mohanka, this is due to a technical issue in the TRACES utility, which reflects TDS credit only up to the applicable rate, not the actual deposited amount.

“Even the correction window of Form 16C doesn’t allow manual override of the TDS credit in excess of 2%.”

Source: ET Wealth, Economic Times
➡️ ET Article on TDS Refund Issues

💡 Alternative Option: Adjusting TDS in Future Rent Payment

“If excess TDS has been deposited, tenants may adjust the balance in future month(s) of the same financial year. However, this requires mutual agreement with the landlord.”

📄 Documents You May Need for Refund Approval

Some cases may require:

Indemnity Bond
Bank Statement
Acknowledgement of Form 26B
TDS Challan Copies
Rent Agreement

🏁 Conclusion

If you’ve deducted TDS at 5% instead of the revised 2% rate after October 1, 2024, you must take action promptly. Either coordinate with your landlord for adjustment in future rent payments or follow the refund request process via TRACES.

With the Income Tax Department’s new e-tutorial and streamlined TRACES portal process, it’s now easier to recover such excess deductions — but you must ensure timely submission and error-free documentation.

🔗 Useful Links

If Need Any Help Contact – https://taxgyany.com

Source Link – https://encr.pw/nvrG5