I am paying monthly rent more than Rs 50,000. Should I deduct TDS monthly or once yearly?

I am paying a monthly house rent of more than Rs 50,000. As per Section 194-IB of the Income Tax Act, I understand that TDS is applicable. Should I deduct and deposit TDS every month, or can it be done once at the end of the financial year in a single payment?

Advice by CA Niyati Shah, Vertical Head - Personal Tax at 1 Finance

Paying rent for your home is a regular expense, but if it amounts to more than Rs 50,000 per month, the Income Tax Department expects you to play a small part in tax compliance - by deducting TDS (Tax Deducted at Source) under Section 194-IB of the Income Tax Act, 1961. But before you panic about monthly paperwork, here’s the good news - you don’t have to deduct and deposit TDS every month.

Under Section 194-IB, individuals or HUFs (not liable for tax audit) are required to deduct 2% TDS only “once” - at the time of paying the rent for March or when vacating the property, whichever is earlier. So, even if your rent crosses the ₹6 lakh per annum threshold, you’re only making a single deduction and deposit per year, not 12.

The process is fairly straightforward. You’ll need to:

> Deduct 2% from the total rent for the year

> Fill out Form 26QC (a challan-cum-statement) within 30 days of deduction

> Issue Form 16C (TDS certificate) to your landlord within 15 days after that

But missing the deadline could result in penalties and interest - so it’s wise to mark your calendar and get this done on time.

Section 194-IB is a smart move by the government to capture rental income in the tax net. It’s a one-time annual compliance - simple, effective, and entirely manageable.

Renting a high-value home shouldn’t mean high-stress tax compliance. With a little awareness, you can stay on the right side of the law - without breaking a sweat.

What is Section 194-IB?
Section 194-IB was introduced to bring high-value rental transactions under the tax net. It mandates individuals or Hindu Undivided Families (HUFs)—who are not liable to tax audit under Section 44AB—to deduct tax at source (TDS) when they pay rent to a resident landlord.

Who must deduct TDS?
Any individual or HUF (not covered under tax audit) paying rent exceeding Rs 50,000 per month to a resident landlord.

When is it applicable?
TDS must be deducted at the time of payment or credit, whichever is earlier.

Who is exempt?

Landlords who are non-residents (covered under Section 195 instead).

Tenants paying monthly rent ≤ Rs 50,000.

> Key Provisions

Provision                Details

Threshold limit         Monthly rent exceeds ₹50,000
Rate of TDS             5% on the total rent amount
PAN of landlord
mandatory                If PAN not provided, TDS must be deducted at 20%
TDS amount limit     TDS capped at last month’s rent
Time of deduction    Once annually at time of credit/payment for March or termination
Form for payment    Form 26QC – Challan-cum-statement filed within 30 days of deduction
TDS certificate         Form 16C to be issued to landlord within 15 days of Form 26QC filing

For example
Suppose you (an individual salaried employee) rent an apartment in Mumbai for Rs 60,000/month:

Total rent for the financial year = Rs 7,20,000

TDS applicable = 5% of Rs 7,20,000 = Rs 36,000

You’ll deduct Rs 36,000 from the last month's rent, or split across as agreed.

File Form 26QC and issue Form 16C to your landlord.