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Income Tax Changes 2026: Tenants Paying Over ₹50,000 Rent Must Deduct 2% TDS by March 31

  • by- Grihik
  • Mar 31, 2026
Under Section 194-IB of the Income Tax Act, tenants paying monthly rent exceeding ₹50,000 must deduct 2% TDS on the total annual rent and withhold it from the March payment. The deadline for depositing the TDS is April 30, 2026.
Income Tax Changes 2026: Tenants Paying Over ₹50,000 Rent Must Deduct 2% TDS by March 31

New Delhi, March 31: Tenants paying monthly rent above ₹50,000 must ensure compliance with Section 194-IB of the Income Tax Act, which requires them to deduct 2 per cent TDS (Tax Deducted at Source) on the total annual rent. The deduction must be made from the March rent payment, with the deposit deadline set for April 30, 2026.

Understanding the 2% TDS Rule

Under Section 194-IB, tenants paying monthly rent exceeding ₹50,000 are required to:

  • Deduct 2% TDS on the total annual rent

  • Withhold the deducted amount from the March rent payment

  • Deposit the TDS with the government by April 30

  • File Form 26QC within 30 days of deduction

  • Issue Form 16C to the landlord

Aarjav Jain, Executive Director and NRI Tax Expert at Dinesh Aarjav and Associates, explained: "So, if the rent is above ₹50,000, TDS deduction is required in such cases. It is mainly in urban and tier 2 cities where rentals are above ₹50,000. For rentals below ₹50,000, that's not a concern at all. Earlier, it was 5%, which people were not following, so now it has been reduced to 2% so that most people comply."

 

Proactive Approach for Tenants

Ritika Nayyar, Partner at Singhania & Co., advised: "For salaried individuals, the main challenge is the cash flow impact, as the entire year's TDS is adjusted in one go. A practical approach is to adjust the March rent pay out by reducing the TDS amount and informing the landlord in advance or planning liquidity through savings or a bonus to avoid a last-minute strain."

Consequences of Non-Compliance

Failure to comply with this TDS requirement can result in:

  • Income tax scrutiny and investigation

  • Penalties for TDS default

  • Interest on delayed deposit

  • The default is considered the tenant's responsibility, not the landlord's

Post-Deduction Process

Once TDS is deducted:

  1. Deposit TDS with the government by April 30, 2026

  2. File Form 26QC within 30 days of deduction

  3. Issue Form 16C to the landlord

The deducted TDS amount reflects in the landlord's Form 26AS, which they can use to reduce their total tax liability when filing their Income Tax Return.

Example

Vikram Mondal, a professional in Bengaluru, pays ₹75,000 in monthly rent. Instead of facing a large deduction in March, he plans ahead by setting aside the required amount starting in January, ensuring a smooth and timely deposit.