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Business Standard
5 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
