According to Section 194IB of the Income Tax Act, individuals and Hindu Undivided Families (HUFs) are required to deduct 2% TDS on rent if the monthly rent of the house exceeds Rs 50,000.
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Income Tax: Section 194IB of the Income Tax Act outlines the rules for TDS on house rent payments. Many landlords assume that TDS is levied on the total rent received from the property. However, Section 194IB doesn’t work that way. Mohit Jain has a question about this. He explains that he receives ₹80,000 in rent from his apartment each month. This rent comes from two tenants, each paying ₹40,000. This is less than the typical rent of ₹50,000 per tenant.
He asks, “Will TDS be deducted on this?” If so, will it be deducted on the total rent for the financial year in March, and will the TDS rate be 2%? Moneycontrol asked this question to renowned tax expert and CA Balwant Jain.
TDS rules on rent under Section 194IB
Jain explained that according to Section 194IB of the Income Tax Act, individuals and Hindu Undivided Families (HUFs) are required to deduct 2% TDS on rent if the monthly rent exceeds ₹50,000. TDS is deducted in March of the financial year or the month in which the tenant vacates the house. If the tenant vacates before March, TDS is deducted in the month in which the rent is credited to the landlord’s bank account.
A Tax Deduction Account Number is not required for the tenant.
He explained that if the rent is paid in cash or through banking channels, the tax must be deducted at the time of payment. There is no need to wait until March of the financial year. The tenant does not need to obtain a Tax Deduction Account Number to deduct TDS on rent. They use Form 26QC (Challan-cum-TDS Statement on Rent) to pay the deducted tax. This single form serves as both a challan for payment and a statement for reporting the deduction.
₹50,000 limit per tenant
Jain stated that the ₹50,000 rent limit applies per tenant, not per property. Since Mohit Jain’s rent from each tenant is less than the ₹50,000 limit, he is not required to deduct TDS from the tenants when paying rent.
