If you’re an individual or a member of a Hindu Undivided Family (HUF) paying monthly rent of more than ₹50,000, you may be wondering whether Tax Deducted at Source (TDS) needs to be deposited every month or just once a year. The short answer: you only need to deduct and deposit TDS once a year, thanks to Section 194-IB of the Income Tax Act, 1961.
Who Needs to Deduct TDS Under Section 194-IB?
Section 194-IB applies to:
- Individuals or HUFs not liable to tax audit under Section 44AB.
- Tenants paying monthly rent exceeding ₹50,000 to a resident landlord.
This provision was introduced to bring high-value rental transactions under the tax net without burdening individual taxpayers with monthly compliance.
TDS Deduction: When and How Much?
Instead of deducting TDS monthly, tenants must:
- Deduct 5% (not 2%) from the total annual rent.
- Do this once during the payment for March or when vacating the property, whichever is earlier.
Example:
If you’re paying ₹60,000/month as rent in Mumbai:
- Annual rent = ₹7,20,000
- TDS @5% = ₹36,000
- Deduct ₹36,000 in March or at the time of vacating.
🔍 Important: If the landlord doesn’t furnish their PAN, TDS must be deducted at 20%.
How to Comply with Section 194-IB
- Deduct TDS: Calculate 5% on total rent and deduct accordingly.
- File Form 26QC: Submit this challan-cum-statement within 30 days of deduction.
- Issue Form 16C: Provide this TDS certificate to your landlord within 15 days of filing Form 26QC.
Deadlines Matter
Missing the due dates can attract penalties and interest. Hence, mark your calendars for March or your vacating date to ensure timely compliance.
Exceptions to the Rule
- Non-resident landlords: Covered under Section 195, not 194-IB.
- Rent ≤ ₹50,000/month: No TDS deduction required.
Bottom Line
Paying rent above ₹50,000 per month doesn’t mean monthly TDS filings. Section 194-IB simplifies the process by allowing one-time annual deduction, making it easier for salaried individuals and small HUFs to stay compliant without constant paperwork.
Read More: Implementation Of Invoice-Wise Reporting In Form GSTR-7 In GST Portal Delayed: GSTN
