What is the TDS rate on rent above ₹50,000/month?

Under Section 194IB of the Income Tax Act, individuals and HUFs (not subject to tax audit) who pay monthly rent exceeding Rs 50,000 are required to deduct TDS before remitting payment to the landlord. The TDS rate applicable has been revised over the years.

Current TDS Rate (as per latest Finance Act)

From October 1, 2024: TDS rate under Section 194IB reduced to 2% (from the earlier 5%).

When to Deduct

• TDS is deducted once a year in the last month of the financial year or the last month of tenancy, whichever comes first.
• If tenancy ends mid-year, deduct TDS in the month of vacating.

Calculation Example

• Monthly rent: Rs 70,000. Annual rent: Rs 8,40,000.
• TDS @ 2%: Rs 16,800 (deducted from last month's payment).
• Amount paid to landlord in last month: Rs 70,000 - Rs 16,800 = Rs 53,200.

The reduction of TDS rate under 194IB from 5% to 2% reduces the cash flow impact on tenants deducting TDS from the last rent payment. Landlords who are aware of this mechanism can plan their advance tax payments accordingly, accounting for the TDS credit they will receive in Form 26AS after the tenant files Form 26QC.