Paying rent above Rs 50,000? Failure to deduct TDS can make you an assessee in default; know what to do - The Economic Times

Many tenants who pay monthly rent over Rs 50,000 don’t realise that they may have TDS (Tax Deducted at Source) obligations as well.

Under the income tax law, such tenants are required to deduct tax on rent payments, deposit it with the government and complete certain compliance formalities.

Missing these requirements can lead to interest, late fees and penalties.Here’s what tenants need to know.TDS on rent: When must tenants deduct tax under Section 194-IB?Under Section 393 of the Income Tax Act, 2025 (earlier Section 194-IB of the Income Tax Act, 1961), tenants who are individuals and/or Hindu Undivided Families (HUFs) and who are not required to undergo a tax audit must deduct TDS from rent paid to a resident landlord if the monthly rent is more than Rs 50,000.Experts say tenants do not require a TAN for this. “It dispenses with the requirement of obtaining a TAN (Tax Deduction and Collection Account Number),” says Raghav Bajaj, Partner at Khaitan & Co.

One important point that tenants often overlook is that once the Rs 50,000 monthly threshold is crossed, TDS applies to the entire rent amount and not just the portion in excess of Rs 50,000.What is the TDS rate applicable on rent?The applicable TDS rate is currently 2% of the rent amount payable to a resident landlord.