Alert for tenants: March is your last window to deduct TDS on rent

pays ₹60,000 rent every month for her apartment in Bengaluru. She keeps rent receipts, has a rent agreement, pays via bank transfer, and has shared his landlord’s PAN with her employer to claim HRA.

By most standards, her paperwork is in order.Yet, a tax notice flagged her as non-compliant. The reason was something she wasn’t aware was part of her legal duties as a tenant: she hadn’t deducted tax on the rent she pays.Under Section 194-IB of the Income Tax Act, tenants paying more than ₹50,000 a month have to mandatorily deduct 2% tax deducted at source (TDS) on the annual rent in March or last month of tenancy.

Failing to do so attracts penalties. There are different rules for TDS on rent when the landlord is a resident versus a non-resident Indian (NRI).In the first case, the TDS gets triggered only after monthly rent exceeds ₹50,000.

It should be deducted once in a year–either in March or at the end of tenancy if the tenancy ends before year end–from the last month’s rent.The TDS rate is 2%, but it increases to 20% if the landlord refuses to share their PAN details or their PAN is not linked to Aadhaar card. Assuming Ritika has her landlord’s PAN details, she should deduct ₹14,400 (2% of ₹7.2 lakh) from March’s rent and deposit it with the government.The ₹50,000 limit is applicable per tenant if there are more than one tenants occupying the same property and paying rent, said Himank Singla, partner at S B H S & Associates, Chartered Accountants.“The reverse is also true when the property has multiple owners.

Say, two owners jointly own a property and receive ₹30,000 rent each for it, the tenant is not required to deduct TDS,” he explained. When the landlord is an NRI, the tenant has to deduct TDS every month and at a