What is Section 194IB?
Section 194IB of the Income Tax Act was introduced in the Finance Act, 2017 to bring high-rent individual tenants into the TDS framework. Before 194IB, only businesses and companies were required to deduct TDS on rent (under Section 194I). Individual tenants — even those paying lakhs in rent — had no TDS obligation.
Section 194IB changed that. Now, if you're an individual or HUF (not subject to tax audit) paying monthly rent exceeding ₹50,000, you must deduct 5% TDS and deposit it with the government.
Who Must Deduct TDS Under 194IB?
- Individual tenants (salaried, self-employed, freelancers)
- HUFs (Hindu Undivided Families) not subject to tax audit
- Anyone paying monthly rent exceeding ₹50,000 for any property
Who is NOT Covered?
- Businesses, companies, firms subject to tax audit → they fall under Section 194I
- Tenants paying ₹50,000 or less per month
- Tenants paying rent to the government or a local authority
Key Facts at a Glance
| TDS Rate | 5% (20% if landlord has no PAN) |
| Threshold | Monthly rent exceeding ₹50,000 |
| TAN Required? | No — PAN of tenant and landlord is sufficient |
| Filing Form | Form 26QC (online, per transaction) |
| Certificate to Landlord | Form 16C (generated from TRACES) |
| When to Deduct | Last month of tenancy or last month of financial year (whichever is earlier) |
Step-by-Step: How to File Form 26QC
- Go to the Income Tax portal: Visit incometax.gov.in
- Navigate to e-Pay Tax: Click on "e-Pay Tax" → Select "Form 26QC (TDS on Rent)"
- Enter tenant details: Your PAN, name, address, email, mobile number
- Enter landlord details: Landlord's PAN, name, address
- Fill rental information:
- Address of the rented property
- Tenancy period (start date to end date)
- Monthly rent amount
- Total rent paid during the period
- System auto-calculates TDS at 5% on total rent
- Make payment: Via Net Banking, Debit Card, or NEFT/RTGS
- Download acknowledgement: Save the Form 26QC acknowledgement for your records
- Generate Form 16C: After 4-5 working days, log into TRACES and download Form 16C
- Issue Form 16C to your landlord: This is their TDS certificate to claim credit
Example Calculation
Priya rents an apartment in Mumbai for ₹75,000/month. Her lease runs from April 2026 to March 2027 (12 months).
- Total rent: ₹75,000 × 12 = ₹9,00,000
- TDS at 5%: ₹45,000
- Net payment to landlord: ₹9,00,000 - ₹45,000 = ₹8,55,000
- Priya files Form 26QC in March 2027 and deposits ₹45,000
Important: TDS Cap Under 194IB
There's a lesser-known cap: the TDS amount under Section 194IB cannot exceed the rent payable for the last month. So if the calculated TDS exceeds one month's rent, it is limited to one month's rent.
For example, if Priya's lease was for 24 months at ₹75,000/month, the calculated 5% TDS would be ₹90,000. But since this exceeds one month's rent (₹75,000), TDS is capped at ₹75,000.
Penalties for Non-Compliance
- Interest: 1% per month from the date TDS was deductible until deduction; 1.5% per month from deduction until deposit
- Late filing fee: ₹200/day under Section 234E (capped at TDS amount)
- Penalty: Equal to TDS amount under Section 271C
Frequently Asked Questions
Can I deduct TDS monthly instead of at year-end?
The law says TDS should be deducted at the end of the year or end of tenancy. However, many tenants prefer to deduct and deposit monthly for easier cash flow management. This is generally accepted by the tax department.
What if I share the flat with a roommate?
If the lease is in your name and you're paying the full rent, you are responsible for TDS. If each roommate has a separate agreement with the landlord, each person's individual rent determines their TDS obligation against the ₹50,000 threshold.
Is TDS applicable on maintenance charges?
If maintenance charges are included in the rent (single payment to landlord), TDS is deducted on the full amount. If maintenance is paid separately to the society/RWA, it's not subject to TDS.
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