Does TDS on rent apply if a landlord’s total rent exceeds Rs 50,000?

How is TDS on rent calculated?

Many landlords assume tax deducted at source (TDS) is based on the total rent received for a property, but that’s not how Section 194IB works. Today's Ask Wallet Wise query decodes how Rs 50,000 threshold applies per tenant.

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I receive rent of my apartment of Rs 80,000 per month. The rent is received from two tenants (i.e., each tenant pays Rs 40,000 per month). Is TDS to be deducted by the tenant while paying the rent, as the rent is Rs 40,000, which is less than Rs 50,000 for each tenant? If TDS is to be deducted, then I believe it needs to be deducted in the month of March on the total rent for the financial year, and the applicable rate would be 2%. Please confirm my understanding.

Expert's Advice: As per Section 194IB, all individuals and Hindu Undivided Families are required to deduct tax at source at 2 percent on rent in case the monthly rent exceeds Rs 50,000.

The tax is to be deducted in the month of March of the financial year or in the month in which the tenancy comes to an end, in case the tenancy is terminated earlier, when the rent is credited to the account of the landlord. In case the rent is paid in cash or through any banking channel, the tax is required to be deducted at the time of payment of rent, without having to wait till March of the financial year.

The tenant is not required to obtain a Tax Deduction Account Number for this purpose. Form 26QC (Challan-cum-Statement for TDS on Rent) is to be used for payment of the tax deducted. This single form serves as both the challan for payment and the statement for reporting the deduction. It is filed electronically on the Income Tax Department's portal.

The limit of Rs 50,000 applies per tenant, not per property. Since the rent payable by each tenant does not exceed the threshold of Rs 50,000, the tenants are not required to deduct TDS at the time of credit or payment of rent to the landlord.