Paying Rent Above ₹50,000 per Month? Section 194-IB and 2% TDS on Rent Explained

If you are paying rent of more than ₹50,000 per month, then Section 194-IB of the Income Tax Act applies to you. Under this rule, you (the tenant) are responsible for deducting 2% TDS on the annual rent and depositing it with the government.

Many tenants don’t know about this and later face penalties and interest. Let’s break it down clearly.

1. TDS Deduction

You (the tenant) must deduct 2% TDS (5% before October 2024) on the total rent paid in the financial year.
This deduction is made once in a year, at the time of paying rent for the last month of the financial year or the last month of tenancy (if you vacate earlier).
TAN is not required. Your PAN is enough for this compliance.

2. How to Pay TDS to the Government (Form 26QC)

Here’s the step-by-step process:

Go to the Income Tax e-filing portal → www.incometax.gov.in
Login using your PAN (as tenant) and password.
Under the main menu, go to e-Pay Tax.
Choose New Payment → Select 26QC (TDS on Rent of Property).
Fill in details like:
- PAN of tenant and landlord
- Property address
- Rent paid during the year
- TDS amount (2% of annual rent)
Proceed to make payment via Net Banking, Debit Card, UPI, or NEFT/RTGS.
After successful payment, you’ll get a Challan/Receipt (keep it safe).

👉 Important: This has to be done within 30 days from the end of the month in which TDS is deducted.

3. TDS Certificate (Form 16C)

After you have deposited the TDS using Form 26QC, the next step is to issue a TDS Certificate (Form 16C) to your landlord. This certificate acts as proof that you deducted and paid tax on rent.

Here’s how you can download it:

Go to the TRACES (TDS Reconciliation Analysis and Correction Enabling System) website → https://www.tdscpc.gov.in.
Login using your PAN (as the tenant/deductor) and the password you created.
- If you’re logging in for the first time, you’ll need to register yourself.
From the dashboard, go to Downloads → Form 16C.
Enter details such as:
- Acknowledgement number of Form 26QC
- PAN of landlord
- Assessment year (for which rent was paid)
Submit the request and wait for the file to be generated.
Once available, download Form 16C PDF (it comes password-protected).
Open the PDF using your PAN (in lowercase) as the password.
Hand over Form 16C to your landlord – this is their official proof of TDS deducted by you.

👉 Remember: Issuing Form 16C is not optional. Without this, your landlord may face mismatch issues in their ITR while reporting rental income.

4. Key Points to Remember

If you don’t deduct or deposit TDS, interest + late fees will apply.
Landlord’s PAN is compulsory. If not available, TDS rate becomes 20% instead of 2%.
Even salaried individuals (not in business) must follow this rule if rent > ₹50,000/month.

❌ What if You Don’t Deduct or Deposit TDS?

If you skip deducting or depositing TDS on rent, the Income Tax Act imposes interest and late fees.

Interest for Late Deduction/Deposit
- If TDS is not deducted on time → Interest @ 1% per month (or part of the month) from the date it should have been deducted till the date it is actually deducted.
- If TDS is deducted but not deposited → Interest @ 1.5% per month from the date of deduction till the date of deposit.
Late Fee (u/s 234E)
- ₹200 per day of delay for filing Form 26QC,
- Capped at the amount of TDS (i.e., max = 2% of annual rent).
Penalty (u/s 271H)
- In rare cases, penalty ranging from ₹10,000 to ₹1,00,000 can be levied for failure to file or incorrect filing of Form 26QC.
- Usually waived if you pay TDS + interest + late fee promptly.

👉 Example

If your rent = ₹1,00,000 per month → ₹12,00,000 per year.
TDS = 2% of ₹12,00,000 = ₹24,000 (deducted once in March).
You’ll file Form 26QC, pay ₹24,000, and issue Form 16C to the landlord.

✅ Pro Tip: Don’t wait till March. Even though TDS is deducted once, keep your landlord’s PAN ready and mark the due date on your calendar so you don’t miss compliance.