TDS on rent of 50000 per month

If you are an individual, taken a house / flat on a monthly rent of Rs.50000, you have to deduct tax (TDS) at the rate of 5% and pay it to the government. Are you aware of this TDS provision on Rent?

If not, here you go-

A new Section 194IB is inserted in Income Tax Act, applicable from 1st June 2017. The Section reads as under –

Payment of rent by certain individuals or Hindu undivided family.

194-IB. (1) Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to five percent of such income as income-tax thereon.

(2) The income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

Explanation.—For the purposes of this section, “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.]

The summary of the above provision is

  • If an individual pays rent of over Rs.50000 per month to the landlord, 5% to be deducted as TDS. (Please note – if the landlord is a NRI, then this provision is not applicable. You have to go by TDS Section 195)
  • TDS to be done on the last month of the year (March) or such earlier month, if the property is vacated before March. This means, even if you pay the rent for the whole year, only on the last month you can deduct tax and pay for the whole year. For example, monthly rent is Rs.50000 and for the year it translates to Rs.6 Lakhs and on the last month, you deduct 5% of Rs.6 lakhs and deposit to the tax department against the PAN of the landlord.

Which Challan is to be used for payment of tax for TDS deducted on rent? By when is the TDS to be deposited? Is there any form which has to be given to the landlord? Should TAN be obtained?

  • Please use Challan-cum-Statement 26QC.
  • Pay the tax deducted on or before 7th of subsequent month
  • Issue form 16C to the landlord. This form is to be downloaded from NSDL website after making the payment
  • TAN is not required.

I am not doing any business; nor getting the books of accounts audited. Should I still deduct tax (TDS)?

Yes. This new provision is applicable to all individuals who pay rent of over Rs.50000 per month.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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