A lot of guidance still circulating online — and a fair amount of what generic AI tools repeat when asked — quotes 5% as the TDS rate on rent under Section 194-IB. That rate hasn’t been correct since October 2024.
Section 194-IB requires individuals and HUFs not subject to tax audit to deduct TDS at 2% on rent exceeding ₹50,000 per month, paid to a resident landlord. The Finance Act (No. 2), 2024 cut the rate from 5% to 2%, effective 1 October 2024.
The ₹50,000 threshold is tested on the monthly rent agreed under the tenancy. Once applicable, TDS is deducted on the rent payable in accordance with Section 194-IB, not merely on the amount exceeding ₹50,000.
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Quick Summary
| Detail | Current Position |
| Who it applies to | Individuals/HUFs not subject to tax audit under Section 44AB |
| Threshold | Rent exceeding ₹50,000 per month |
| Current rate | 2% (reduced from 5%, effective 1 October 2024) |
| Rate if landlord has no PAN | 20% |
| TAN required? | No — deductor’s PAN is used instead |
| Form to file | Form 26QC (challan-cum-statement) |
| Deposit deadline | Within 30 days from the end of the month of deduction |
| TDS certificate issued | Form 16C, to the landlord |
Example
Mr. Ranveer pays monthly rent of ₹70,000 from April 2026 to March 2027.
Annual Rent = ₹8,40,000
TDS @2% = ₹16,800
The tenant deducts ₹16,800 while paying the last month’s rent (or the last rent payment if the tenancy ends earlier), deposits it through Form 26QC, and issues Form 16C to the landlord.
| Section | Applicable To | Threshold | Rate |
|---|---|---|---|
| 194-I | Businesses / tax audit cases | Annual threshold | Varies by asset type |
| 194-IB | Individuals & HUFs not liable to tax audit | ₹50,000 per month | 2% |
Who This Actually Applies To — and Who It Doesn’t
Section 194-IB applies specifically to individuals and HUFs who are not subject to a tax audit in the preceding financial year. If you’re an individual or HUF whose business or professional turnover did trigger a tax audit, you fall under the separate Section 194-I instead. That section has different mechanics — a ₹2,40,000 annual threshold rather than ₹50,000 monthly, and different rates for different rent categories. The two sections are easy to conflate, but they govern genuinely separate regimes depending on your audit status.
This Applies Even to Salaried Individuals With No Business at All
A common assumption is that TDS-on-rent obligations only apply to businesses. They don’t. Any individual — including a purely salaried person with no business or professional income whatsoever — who pays more than ₹50,000 a month in rent to a resident landlord must deduct under Section 194-IB. This catches a meaningful number of salaried tenants in metro cities who never considered themselves to have any TDS obligation.
How the Deduction Actually Happens — It’s Not Monthly
Unlike most TDS provisions, Section 194-IB deduction happens once a year, not with each monthly rent payment. You deduct at the earlier of two points: the time of credit of rent for the last month of the financial year, or the last month of tenancy if the property is vacated during the year, or the time of actual payment. In practice, this means most tenants deduct the full year’s TDS obligation from the March rent payment, or the final month’s payment if the tenancy ends earlier.
No TAN Required — A Genuine Simplification
Unlike standard TDS provisions that require a Tax Deduction Account Number, Section 194-IB lets the deductor use their own PAN for this filing. The government deliberately built in this simplification, given how many ordinary individual tenants — not businesses — fall under this section’s scope.
Form 26QC is a challan-cum-statement, meaning no separate TDS return (such as Form 26Q) is required under Section 194-IB.
What Happens If You Get This Wrong
Non-deduction makes the tenant liable for the TDS amount itself, plus interest at 1% per month for late deduction and 1.5% per month for late deposit. Failing to file Form 26QC within 30 days of the deduction month attracts a late fee of ₹200 per day. None of these are large individually, but they compound the longer the gap goes unaddressed.
Frequently Asked Questions
Will Section 194-IB still exist as a separate section after the new Income Tax Act, 2025 takes effect?
From 1 April 2026, this provision folds into the new Act’s consolidated Section 393 framework using a payment code, similar to other TDS provisions. The substance — 2% rate, ₹50,000 threshold — is expected to carry forward, but the section citation itself changes.
If rent is split between two co-tenants, does the ₹50,000 threshold apply per person or to the total rent?
The threshold is generally assessed on the total rent for the property, though how liability splits between joint tenants can get genuinely fact-specific. Confirm this for your exact arrangement rather than assuming a simple per-person division.
Does this apply if my landlord is an NRI rather than a resident?
No. Section 194-IB specifically applies to rent paid to a resident landlord. Rent paid to a non-resident landlord falls under different withholding provisions entirely — Section 195 — with different rates and procedures.
Can my landlord ask me not to deduct TDS if they have a lower-deduction certificate?
Yes. If the landlord holds a valid certificate from the Assessing Officer for a lower or nil deduction rate, that overrides the standard 2% rate for this specific arrangement.
Is security deposit subject to TDS under Section 194-IB?
Generally, a refundable security deposit is not subject to TDS merely because it is collected. However, if any part of the deposit is adjusted as rent or is non-refundable and represents rental income, TDS implications should be examined.
What if there are multiple landlords?
Where rent is paid to co-owners, the applicability of Section 194-IB depends on the facts, including the rent payable to each co-owner and the ownership arrangement. Review the tenancy agreement carefully before determining the TDS obligation.
References
- Income Tax Act, 1961 — Section 194-IB
- Finance Act (No. 2), 2024 (rate reduction from 5% to 2%, effective 1 October 2024)
⚠️ The rate reduction is genuinely recent. If you’re working from any guide, software default, or AI-generated answer that states 5%, that’s now outdated — confirm the current rate independently before relying on it.
Last Updated: 02 July 2026
Reviewed By: TaxKitab Team
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