News: Tenants paying over Rs 50,000 monthly rent must deduct 2% TDS by March-end, experts explain-31-03-2026
Tenants paying more than Rs 50,000 a month in rent must deduct 2% TDS under Section 194-IB, and the duty rests with the tenant. The tax is calculated on the total annual rent and withheld from the March payment.
The article illustrates this with Vikram Mondal, a Bengaluru professional paying Rs 75,000 a month, who plans to set aside the required amount from January so that the deposit in March is smooth and timely.
Aarjav Jain, Executive Director and NRI tax expert at Dinesh Aarjav and Associates, Chartered Accountants, advises tenants with high rents to plan ahead and start setting aside the 2% in January or February, since the final deduction is roughly equal to one month’s rent. He said such rentals are mostly seen in urban and tier 2 cities, and that rents below Rs 50,000 are not a concern. The rate was earlier 5%, which people did not follow, so it was cut to 2% to encourage compliance.
For salaried tenants the main difficulty is cash flow, because the whole year’s TDS is adjusted at once. Ritika Nayyar, Partner at Singhania & Co, suggested reducing the March rent payout by the TDS amount after informing the landlord in advance, or arranging funds through savings or a bonus.
Failure to comply is the tenant’s default, not the landlord’s, Jain said. It can invite scrutiny from the income tax department along with TDS penalties and interest.
Nayyar said the TDS must be deposited and Form 26QC filed within 30 days, which is April 30 if the deduction is made in March, followed by issuing Form 16C to the landlord. Once the tenant deposits the 2% using the landlord’s PAN and issues Form 16C, the amount shows in the landlord’s Form 26AS and can be used to reduce tax liability when filing the ITR.
