The Basics of TDS on Rent
Tax Deducted at Source (TDS) is a mechanism by the Indian government to collect tax at the very source of income. If you earn rental income, your tenant might be required to deduct TDS before paying you.
Section 194I (Commercial & Corporate Tenants)
Under Section 194I, if your tenant is a company, firm, or an individual subject to tax audit, they must deduct 10% TDS if the annual rent exceeds ₹2,40,000.
Section 194IB (Individuals & HUF)
For residential properties where the tenant is an individual not subject to tax audit, Section 194IB applies. They must deduct 5% TDS if the monthly rent exceeds ₹50,000. This is typically deducted once a year in the last month of the financial year or upon vacating.
How to Claim Your TDS
Your tenant must deposit the TDS and issue you a Form 16C. This TDS will reflect in your Form 26AS, which you can use to claim credit when filing your Income Tax Return (ITR).
Disclaimer: Tax laws change. Always consult a CA for the latest advice.