TDS on Payment of House Rent

TDS09/09/2023

Applicability and Rate of TDS

Any person, being individual or HUF responsible for paying to a resident any income by way of house rent exceeds Rs. 50,000 for a month or part of a month during the previous year, required to deduct income tax at the rate of 5%.

According to section 194-IB of Income Tax Act requires any person, being individual or HUF, other than those individual or HUF whose total sales, gross receipts or turnover from the business or profession exceeds Rs. 1 crore in case of business and 50 lakhs in case of profession in the financial year immediately preceding the financial year in which such rent was credited or paid, responsible for paying to a resident any income by way of rent, to deduct income tax at the rate of 5%.

Threshold limit of House Rent

Under this section, tax has to be deducted at source only if the amount of such house rent exceeds Rs. 50,000 for a month or part of a month during the previous year.

Time of deduction

This deduction is to be made at the time of credit of such 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 cheque or draft or by any other mode, whichever is earlier.

No requirement to obtain TAN

The provisions of section 203A containing the requirement of obtaining Tax deduction account number (TAN) shall not apply to the person required to deduct tax in accordance with the provisions of section 194-IB.

Meaning of "House Rent"

"House Rent" means any payment, by whatever name called, under any lease, sub-lease, huse rent, tenancy or any other agreement or arrangement for the use of any land or house building or both.

Deduction not to exceed house rent for last month

Where the tax is required to be deducted as per the provisions of section 206AA or section 206AB, 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. [Sections 206AA and 206AB providing for deduction of tax at source at a higher rate.]

For Example:-

(1) Mr. Ram, a salaried individual, pays rent of 55,000 per month to Mr. Shyam from June, 2021. Is he required to deduct tax at source? If so, when is he required to deduct tax?

Answer:- Since Mr. Ram pays rent exceeding Rs. 50,000 per month in the F.Y. 2021-22, he is liable to deduct tax at source @5% of such rent for F.Y. 2021-22 under section 194-IB. Thus, Rs. 27,500 [Rs. 55,000 x 5% x 10] has to be deducted from rent payable for March, 2022.

(2) Mr. Ram, a salaried individual, pays rent of 55,000 per month to Mr. Shyam from June, 2021. Is he required to deduct tax at source? If so, when is he required to deduct tax if Mr. Shyam does not provide his PAN to Mr. Ram ?

Answer:- Since Mr. Ram pays rent exceeding Ram 50,000 per month in the F.Y. 2021-22, he is liable to deduct tax at source @20%, instead of 5%. of such rent for F.Y. 2021-22 under section 194-IB. Thus, this would amount to Rs 1,10,000 [Rs 55,000 x 20% x 10] but the same has to be restricted to Rs 55,000, being rent for March, 2022.

Documents for depositing TDS on house rent

PAN of landlord (Owner of house)
PAN of tenant (Person paying house rent)
Aadhaar number of the landlord
Aadhaar number of tenant

How to deposit TDS on house rent

To deposit TDS on house rent, the tenant is required to fill and file Form 26QC on the income tax e-filing portal. The tax deducted on monthly rent payments can be deposited to the Government on a monthly basis using Form 26QC.

Once Form 26QC is successfully filed, a tenant is required to give Form 16C to the landlord.