Paying Rent Over ₹60,000/Month? TDS To Be Deducted Once or Every Month?

Paying monthly rent over ₹50,000 often triggers questions about tax compliance. One such query is whether Tax Deducted at Source (TDS) needs to be deposited every month. Fortunately, Section 194-IB of the Income Tax Act, 1961, simplifies this process for individuals and Hindu Undivided Families (HUFs) who are not liable to tax audit.

Under this provision, if your monthly rent exceeds ₹60,000, you’re required to deduct TDS at 5%—but only once a year. This deduction must be done in March or when the lease ends, whichever comes earlier.

What Is Section 194-IB?

Section 194-IB was introduced to ensure that high-value rental transactions are reported to the tax authorities. The section applies to:

• Individuals or HUFs not covered under tax audit (i.e., those whose turnover or gross receipts do not exceed the prescribed limits under Section 44AB).

• Rent paid to a resident landlord exceeding ₹50,000 per month.

This provision mandates the tenant to deduct TDS before making the final payment for the year.

Who Is Required to Deduct TDS?

If you’re an individual or HUF and not liable to a tax audit, but your monthly rent payment exceeds ₹50,000, you fall under the ambit of Section 194-IB. The obligation to deduct TDS does not apply:

• If the landlord is a non-resident (covered separately under Section 195).

• If the rent is ₹50,000 or less per month.

Timing and Rate of Deduction

TDS must be deducted:

• Once a year, at the time of credit or payment for March’s rent or when the tenant vacates the property, whichever is earlier.

• At 5% of the total rent paid during the financial year.

Example:

If you are paying ₹60,000 per month:

• Annual rent = ₹7,20,000

• TDS = 5% of ₹7,20,000 = ₹36,000

You are required to deduct ₹36,000 just once and file the necessary forms.

Step-by-Step Compliance Process

Complying with Section 194-IB involves three steps:

1. Deduct 5% TDS from the total rent for the financial year.

2. File Form 26QC (challan-cum-statement) online within 30 days of deduction.

3. Issue Form 16C (TDS certificate) to the landlord within 15 days of filing Form 26QC.

This simple process ensures that both the tenant and the landlord remain tax-compliant.

Read More: What is House Rent Allowance? HRA Exemption & Calculation. 

What If PAN Is Not Provided?

If the landlord fails to furnish their PAN, the TDS rate increases sharply to 20%, subject to a cap of the rent for the last month. Therefore, it’s essential for tenants to ensure the landlord provides a valid PAN to avoid higher deductions and unnecessary complications.

Quick Snapshot of Key Provisions

Conclusion

Renting a premium home doesn’t mean having to deal with monthly tax paperwork. Section 194-IB offers a practical approach by allowing a single, annual TDS deduction and filing requirement. With a basic understanding of timelines and documentation, you can stay fully compliant without the burden of frequent deductions.

 Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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