If you pay monthly rent above ₹50,000, you must deduct 2% TDS and deposit it with the Income Tax Department before March 31, 2026. This rule applies to tenants not covered under tax audit. The reduced rate of 2% (earlier 5%) was introduced in Budget 2024 to ease compliance.
The deduction should be made when paying rent for March 2026 or at the time of vacating the property, whichever comes first. Once deducted, the amount must be deposited within 30 days using Form 26QC on the e-filing portal. After payment, tenants must issue Form 16C to landlords within 15 days. Importantly, no TAN is required PAN details are sufficient.
Failure to comply can be costly. If you don’t deduct, interest at 1% per month applies. If you deduct but delay deposit, interest rises to 1.5% per month. Filing Form 26QC late attracts ₹200 per day, and tax authorities may levy additional penalties. Non-compliance can also cause mismatches in the landlord’s income tax return, leading to notices.
Tenants should avoid common mistakes like confusing monthly rent with annual rent, missing landlord PAN (which triggers 20% TDS), or errors in Form 26QC. Timely deduction and deposit ensure smooth compliance and prevent unnecessary financial burden.
