TDS on Rent (Section 194-IB): Complete Guide for Tenants and Landlords
Reviewed by CA Nikhil Gupta · Last reviewed 16 June 2026
An individual or HUF paying a resident landlord more than ₹50,000 for a month or part of a month may have to deduct rent TDS at 2%, including on a personal residence. Determine the payer category from the statutory preceding-year business/professional receipts test, rather than merely whether an audit was carried out. Legacy section 194-IB applies to the earlier period; Tax Year 2026–27 uses section 393(1), Table 2(i).
What is Section 194-IB?
For Tax Year 2026–27, section 393(1), Table 2(i) covers resident land/building rent paid by an individual or HUF outside the specified-person category. The specified-person test includes preceding-year business turnover above ₹1 crore or professional receipts above ₹50 lakh; those payers instead fall under the applicable Table 2(ii) route. The 2% route applies when rent exceeds ₹50,000 for a month or part of a month. There is no separate ₹6 lakh annual safe harbour. The corresponding legacy provision is section 194-IB; its rate became 2% on 1 October 2024.
This provision was introduced specifically to bring high-value residential and commercial rent payments by individuals — who otherwise have no TDS obligations — within the tax deduction net.
Who needs to deduct TDS under 194-IB?
| Tenant type | Applicability |
|---|---|
| Individual/HUF outside the specified-person category; resident landlord; rent above ₹50,000 for a month or part-month | Current section 393(1), Table 2(i): 2%; legacy section 194-IB for the earlier period |
| Individual/HUF exceeding the preceding-year statutory business/professional receipts test | Specified-person route: current Table 2(ii); legacy section 194-I. Audit status alone does not decide. |
| Companies, firms, etc. | Section 194-I applies (not 194-IB) |
| Rent ≤ ₹50,000/month | No TDS required under 194-IB |
This commonly affects salaried individuals or professionals renting a high-value apartment for personal residence or for a home office, in metro cities where monthly rents above ₹50,000 are increasingly common.
TDS rate and computation
- TDS rate: 2% of the total rent paid for the financial year (reduced rates may apply for specific periods as notified by the government from time to time — always check the rate applicable for the relevant financial year)
- TDS is deducted once — either at the time of credit of rent for the last month of the financial year (or last month of tenancy, if the property is vacated during the year), or at the time of payment, whichever is earlier
- If the landlord does not furnish PAN, TDS is deducted at a higher rate of 20%, but cannot exceed the amount of rent payable for the last month
How to deposit TDS — Form 26QC
Unlike regular TDS (which requires a TAN and monthly TDS returns), Section 194-IB has a simplified compliance process designed for individuals:
- No TAN (Tax Deduction Account Number) is required — the tenant's PAN is sufficient
- TDS is deposited using Form 26QC, a combined challan-cum-statement filed online on the income tax e-filing/TIN portal
- Form 26QC must be filed within 30 days from the end of the month in which the TDS was deducted
- Both the tenant's and landlord's PAN, the property address, rent period, and rent amount must be furnished
Issuing Form 16C to the landlord
After depositing TDS via Form 26QC, the tenant must download and issue Form 16C — the TDS certificate — to the landlord within 15 days from the due date of furnishing Form 26QC. The landlord uses Form 16C to claim credit for the TDS deducted against their total tax liability (the rent received is reported as income, typically under "Income from House Property").
Penalties for non-compliance
| Default | Consequence |
|---|---|
| Failure to deduct TDS | Interest @ 1% per month from the date TDS was deductible until actually deducted |
| Failure to deposit TDS after deduction | Interest @ 1.5% per month from the date of deduction until deposit |
| Late filing of Form 26QC | Late fee under Section 234E for each day of delay |
| Failure to deduct/deposit altogether | Disallowance is generally not applicable (since rent isn’t a business expense for most individuals), but interest, late fees, and potential penalty under Section 271C can apply |
Practical checklist for tenants
- Test rent for each month or part-month. For example, ₹55,000 for only eight months crosses the monthly test although annual rent is only ₹4,40,000. Exactly ₹50,000 does not exceed this threshold.
- Collect the landlord's PAN at the start of the tenancy to avoid the 20% higher TDS rate
- Mark a calendar reminder for the 30-day Form 26QC deadline after the last month of the financial year (or after vacating)
- Download and share Form 16C with the landlord promptly so they can claim TDS credit while filing their ITR
2026 current-law quick reference
What changes the answer?
| What to check | What to do | Common mistake to avoid |
|---|---|---|
| Core classification | For FY 2025–26, section 194-IB applies to qualifying individual/HUF rent when rent exceeds ₹50,000 for a month or part of a month, at 2%. It is not an annual ₹6 lakh cumulative threshold. From 1 April 2026 the corresponding PAN-based rent transaction is reported through Form 141 Schedule A under section 393. | Do not decide from the label used on an invoice, agreement or bank narration alone. |
| Edge case | Check each landlord/co-owner and tenancy period; do not convert the monthly trigger into an annual averaging test. | Recompute when the fact pattern crosses this boundary. |
| Evidence | Reconcile the documents below to the tax/regulatory return before filing. | A correct legal rule with an unreconciled evidence trail can still fail in assessment or audit. |
| Effective date | Apply the law/form/rate for the actual transaction, tax year or proceeding date. | Do not mix FY 2025–26/AY 2026–27 legacy references with post-1-April-2026 forms. |
Worked practical example
Rent is ₹55,000 for only 8 months. The monthly threshold is crossed even though annual rent is ₹4.4 lakh; legacy 194-IB can still apply.
Evidence checklist
- lease
- monthly payment ledger
- landlord PAN
- Form 26QC/16C for legacy year
- Form 141 for post-1-April-2026 transaction
Primary-source checks: Income Tax Department — Form 141 / 26QC transition · Income Tax Department — TDS rates
How to use this: This current-law summary reflects the latest position. Where it conflicts with an older rate, threshold, form or section reference elsewhere on the page, rely on the current, dated primary source above.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Primary sources & related provisions
Statutory provisions referenced in this guide: