TDS on rent: who deducts, how much, and how to deposit it

The ₹50,000-a-month threshold under section 194-I replaced the old ₹2.4 lakh-a-year limit from 1 April 2025. The 2 percent rate under section 194-IB replaced 5 percent from 1 October 2024. For tax deducted from 1 April 2026 the provisions sit in section 393 of the Income-tax Act, 2025, with the same thresholds and rates; TRACES and most forms still show the familiar section numbers.

Rent means any payment for the use of land, building, machinery, plant, equipment, furniture or fittings, under any lease, sub-lease or tenancy, whether or not the payee owns the asset. Warehousing charges, hotel rooms taken on a regular basis, and hall hire all count.

Tax is deducted when the rent is credited or paid, whichever is earlier, and deposited by the 7th of the following month (30 April for March). GST charged separately on the invoice is excluded from the amount on which tax is deducted. A refundable security deposit is not rent; an advance adjustable against rent is. Where a property has co-owners with defined shares, the threshold applies to each co-owner separately.

If the landlord does not give a PAN, or the PAN is inoperative because it is not linked to Aadhaar, the rate is 20 percent. A landlord whose total income is below the taxable limit can give Form 15G or 15H, or obtain a lower-deduction certificate under section 197.

An individual paying more than ₹50,000 a month in rent must deduct 2 percent, even if the tenant is a salaried employee with no business at all. The design is deliberately light: the deduction is made once, from the rent for the last month of the financial year or of the tenancy, whichever is earlier, on the whole year’s rent.

1. Deduct 2 percent of the total rent for the year from the final month’s payment.
2. Within 30 days of the end of that month, file Form 26QC on the e-filing portal’s e-Pay Tax service with your PAN and the landlord’s PAN and pay the tax. No TAN is needed.
3. Download Form 16C from TRACES and give it to the landlord within 15 days of the due date for Form 26QC.

If the landlord has no PAN the rate is 20 percent, but the deduction cannot exceed the last month’s rent. A tenant claiming house rent allowance on rent above ₹1 lakh a year already reports the landlord’s PAN to the employer; the department matches the two, which is how missing Form 26QCs are found.

Rent paid to a non-resident falls under section 195, with no threshold: tax is deducted from the first rupee at 30 percent plus 4 percent cess, 31.2 percent, and surcharge where the landlord’s income is high enough. The tenant, even a salaried individual, needs a TAN, deposits the tax monthly, files Form 27Q each quarter and issues Form 16A. The bank will ask for Form 15CA, and Form 15CB above ₹5 lakh a year, before remitting rent abroad; see our 15CA and 15CB guide.

The landlord can apply for a lower-deduction certificate where their actual tax liability is lower, which is common, and the tenant then deducts at the certified rate. Tenants who deduct nothing because the rent is paid into an Indian NRO account are the ones who receive the default notice.

• Interest at 1 percent a month for not deducting, and 1.5 percent a month for deducting and not depositing.
• A late fee of ₹200 a day under section 234E for a late Form 26QC or quarterly statement, capped at the tax amount.
• A penalty of up to the amount of tax not deducted under section 271C, and ₹10,000 to ₹1 lakh under section 271H for a statement not filed.
• For businesses, 30 percent of the rent is disallowed as an expense until the tax is deducted and paid.

Our TDS service handles 26QC, 26Q and 27Q filings and the certificates; the quarterly dates are in our TDS calendar.