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Business Standard
7 days ago
- Business
- Business Standard
Over ₹50k on rent? Here's the TDS rule that could cost you big if ignored
Paying rent above Rs 50,000 a month? As a tenant, you may be legally required to deduct tax at source (TDS) and deposit it with the government. Missing this crucial step could land you in trouble with penalties of up to Rs 1 lakh, tax experts warn. What the law says Under Section 194-IB of the Income Tax Act, individuals or Hindu Undivided Families (HUFs) not subject to tax audit must deduct TDS at 2 per cent if the monthly rent exceeds Rs 50,000. 'This provision, introduced in 2017, is still widely misunderstood, especially among salaried tenants in metro cities paying high rents,' said Niyati Shah, chartered accountant and vertical head -- Personal Tax at 1 Finance. 'If your monthly rent exceeds Rs 50,000, you must deduct TDS at 5 per cent and deposit it once in a financial year, either in March or when vacating the property, whichever is earlier,' explained Kinjal Bhuta, chartered accountant, advocate and secretary, Bombay Chartered Accountants' Society. 'There's no need to obtain a Tax Deduction Account Number (TAN); quoting your PAN and the landlord's PAN is sufficient.' 'The deducted tax must be deposited via Form 26QC within 30 days and a Form 16C TDS certificate issued to the landlord within 15 days,' Shah added. For those running businesses or professions with turnover above RS 1 crore (business) or Rs 50 lakh (profession), Section 194-I(b) applies. 'Such taxpayers must deduct TDS at 10 per cent if annual rent crosses Rs 2.4 lakh and require a TAN,' noted Suresh Surana, chartered accountant. What happens if you miss it? Failing to comply can be expensive. 'Overlooking TDS obligations can lead to a financial and compliance headache,' Shah warned. Experts states consequences include: -Interest of 1 per cent per month for not deducting TDS and 1.5 per cent per month for delayed deposit. -Late filing fee of Rs 200 per day until Form 26QC (the TDS return for rent) is submitted. -Penalty up to Rs 1 lakh under Section 271H for not filing Form 26QC or issuing Form 16C on time. In extreme cases, prosecution with jail terms ranging from 3 months to 7 years may apply for wilful defaults, Surana said. Missed the deadline? Here's what to do Voluntary compliance is key. 'If you've missed TDS, calculate and deposit it immediately with applicable interest through Form 26QC. Then issue Form 16C to your landlord,' advised Shah. She added that tenants can request a waiver of penalties by citing genuine reasons, especially for first-time lapses. Surana agreed, stressing the importance of acting swiftly. 'Prompt correction before receiving a tax notice is viewed favourably by authorities.' Common mistakes to avoid Many tenants wrongly assume TDS applies only when rent is paid to companies or that personal rent is exempt. 'TDS applies irrespective of whether the landlord is an individual, HUF, or company, provided the Rs 50,000 threshold is crossed,' Surana clarified. Experts suggested few precautions for tenants: -Collect the landlord's PAN when signing the lease. -Maintain proof of TDS payment and Form 16C issuance. -Cross-verify entries in the landlord's Form 26AS to avoid disputes. Why it matters With the Income Tax Department tracking high-value transactions digitally, tenants ignoring TDS obligations risk notices, interest and penalties. 'A small deduction today avoids a big problem tomorrow,' Shah summarised
India Today
07-07-2025
- Business
- India Today
House rent above Rs 50,000? Here's the TDS rule you need to know
If you're paying more than Rs 50,000 a month in rent, there's a tax compliance rule that's easy to miss, but costly to ignore. Under Section 194-IB of the Income Tax Act, even salaried individuals are required to deduct tax at source (TDS) before paying rent and deposit it with the rule is often misunderstood as applicable only to businesses or those under tax audit. But it also covers individuals, including salaried tenants. Anyone paying rent above the Rs 50,000 threshold in a financial year must deduct 2% TDS and file the necessary deduction must be made once during the year—either in March or the final month of the tenancy, whichever comes earlier. The tenant is then required to file Form 26QC and provide Form 16C to the landlord. Non-compliance can trigger serious consequences. According to a tax compliance platform, one salaried individual named Abhishek paid Rs 55,000 per month in rent but failed to deduct TDS. As a result, he was issued a penalty of Rs 1,00,000 by the income tax department.'Abhishek, a salaried person, was asked to pay a penalty of Rs 1,00,000 by income tax. His mistake? He paid Rs 55,000/month in rent but didn't deduct TDS. Even salaried people need to deduct TDS at times,' stated in a LinkedIn case, also highlighted by the platform, involved Rohan, a salaried employee who had been paying Rs 60,000 in rent since April 2022. He failed to deduct and deposit TDS for two consecutive financial years. When he finally complied in April 2025, he ended up paying Rs 37,000 in late fees and interest—more than the TDS amount obligations are often overlooked in personal financial planning. Yet failure to comply can lead to a late fee of Rs 200 per day under Section 234E, capped at the amount of TDS due. Interest accrues at 1% per month for failure to deduct and 1.5% for failure to deposit, under Section 201(1A). Penalties between Rs 10,000 and Rs 1,00,000 can be levied under Section 271H, and prosecution is also possible under Section 276B, carrying a jail term of three months to seven 194-IB is one of several personal-payment-related TDS provisions. Under Section 194-IA, buyers must deduct 1% TDS on property purchases exceeding Rs 50 lakh. Section 194M requires individuals to deduct 2% TDS on personal payments exceeding Rs 50 lakh made to contractors, professionals or agents. Meanwhile, Section 194S applies to peer-to-peer crypto transactions conducted outside exchanges, mandating a 1% authorities have been tightening scrutiny on high-value personal payments. As examples show, routine transactions like paying rent can easily invite penalties if compliance is tenants living in high-rent homes, the line between a routine payment and a tax lapse can be thinner than it seems, and ignoring it can invite penalties that quickly snowball.- Ends
Time of India
26-04-2025
- Business
- Time of India
TDS on Rent: How to get a refund for excess TDS deducted from house rent payments? Here's a step-by-step guide
If you are paying house rent above Rs 50,000 per month then you need to deduct TDS at 2% rate on the house rental payments from October 1, 2024. However, prior to October 1, 2024 this rate of TDS was 5%. This change in rate of TDS may have caused confusion among tenants as lately there have been increased incidents where tenants who are supposed to deduct TDS at 2% rate before paying rent to the landlord, deducted 5% TDS instead. #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" So, October onwards landlord could only get 2% TDS credit but if the tenant deducted 5% TDS by mistake, the remaining 3% TDS amount remained a suspense. Tenants have the option to either seek a refund for such excess payments from the income tax department or ask the landlord for adjusting the excess deduction. To know more about the excess TDS refund process , a taxpayer can refer to the Income Tax Department's TRACES website which has an e-tutorial which gives a comprehensive guide to taxpayers who want to get TDS refund for excess deductions made. This e-tutorial by the Income Tax Department aims to address this issue and tell taxpayers how to get a refund for such excess TDS deductions. Mihir Tanna, associate director, S.K Patodia LLP shares his experience about the excess TDS deduction case: 'In one of my friends' cases he deducted Rs 36,000 TDS when he should have deducted Rs 14,400, so that's an excess deduction of Rs 21,600 for which he now has to get a TDS refund from the income tax department. But as can be seen, the TDS refund process is a bit complicated and I can only suggest that the Income Tax Department make the whole TDS refund procedure a bit simpler or give credit of excess TDS to deductee. " How to get a refund for excess TDS deducted? According to this recently released e-tutorial by the Income Tax Department, only TDS deductors can apply for TDS refund relating to FY 2007-08 onwards. Live Events Chartered Accountant Mayank Mohanka, Partner, SM Mohanka & Associates & Founder- says: "The TDS rate on rental payments made by individuals & HUFs, exceeding Rs 50,000 per month under Section 194IB, has got reduced from 5% to 2% w.e.f. 1.10.2024. In some cases, due to lack of awareness about this rate change, the individual tenants had deducted & deposited the higher TDS @ 5% in place of 2% for the entire year of 2024-25, vide their annual Form 16C & challan 26QC." Sudhir Kaushik, co- founder & CEO, TaxSpanner says: "The credit will be allowed for the amount deducted and deposited by the landlord, even if it is deducted at a higher rate. In case TDS deducted @5% instead of 2% applicable, the tenant can adjust the extra amount in next month's of the same financial year. In case the landlord not agreeing to do so or the same cannot be adjusted, then alternative mechanism should be used." Tanna says, individual taxpayers deducting TDS on rent have no option but to take a refund for such excess TDS deduction, unlike other taxpayers who have the option to adjust such excess TDS deduction for the earlier/same/next year. "In another case when we applied for refund on excess TDS on property; after filing the application we have been asked to provide additional documents like indemnity bond, bank statement," says Tanna. Things to know about refunds of excess TDS deducted It is mandatory to register the digital signature of authorized persons on TRACES to submit the Refund Request. PAN of Deductor as per TAN Master and TRACES profile should be same and non-blank. No Outstanding demand should be present against TAN and against any TAN(s) associated with PAN of Deductor (if available). No Outstanding demand should be present against PAN of Deductor. A refund request consists of a maximum of Five Challans. For more than five 5 Challans, the Deductor needs to raise a new refund request. Maximum refund amount will be the available unclaimed balance amount in the Challan history. Refund requests can be raised for those Challans where the unclaimed amount is greater than Rs. 100.00 per Challan. Ensure that all statements in which the challan has been claimed should be processed before claiming refund for the challan. Landlords will get credit of 2% TDS only, even if tenant deducted 5% TDS Mohanka says: "As per the law, the full TDS credit of actual TDS deducted & deposited by tenants (even if higher than applicable rate) should be reflected in Form 26AS of respective landlords, and which can be claimed by them while filing their ITRs. However, strangely in Form 26AS of such landlords, corresponding TDS credit @ only 2% is being reflected. This appears to be due to a technical glitch in the TRACES utility which got updated to incorporate the TDS rate change. Even the correction window of Form 16C doesn't have any option to manually override the TDS credit amount in excess of 2% on actual deposition basis. This faulty TDS utility, is causing undue hardships to the landlords, and so should be rectified immediately, to reflect the full TDS credit on actual deposition basis & not on the basis of applicable TDS rate." How do you get a refund for excess TDS deducted? According to the e-tutorial, here's a step-by-step guide: Step 1: Step 1: Login to TRACES website and go to 'Request for Refund' under 'Statement Payment' tab. Step 2: Go to the refund checklist and click on 'Proceed'. TDS on house rent Source: Income Tax Department e-tutorial Step 3 : Please select Section code: ➢ Refund Request for Challan u/s 195 ➢ Refund Request for Challan other than sec. 195 ➢ Select Appropriate reason for raising the Refund Request, Click on ' Add Challan' after selecting appropriate reason. TDS on Rent TRACES Source: Income Tax Department e-tutorial Step 4 : Give Challan details & select Whether Challan pertains to appeal order or Whether Challan pertains to Vivad se Vishwas Scheme then enter appeal order number/ Vivad se Vishwas Scheme number received from appellate authority. Step 5: Provide Bank Account details to proceed with the request. Step 6: Verification page : Click on 'Proceed' to continue TDS refund request. Step 7: Confirmation Page : Click on 'Submit Refund Request' to continue TDS refund request. Step 8: Select a 'Digital Signature Certificate' to proceed further Step 9: Form No. 26B Acknowledgement must be submitted within 14 days to the Assessing officer. Note: Refund request will be transferred to ADC approval (if refund amount is exceeding Rs. 50 Lakh) Step 10: Request will be available under ' Track refund Request'. Step 11: Under 'Track Refund Request' select search 'Option 1 or Option 2' to view Refund Status with remarks.
