If your monthly rent is above ₹50,000, the tenant must deduct TDS at 5% before paying rent to the landlord. No TAN required. File Form 26QC on the Income Tax portal. This is extremely common in Mumbai — especially in South Mumbai, Bandra, BKC, Powai, and Lower Parel where 1BHK rents regularly cross ₹50,000.
Section 194IB of the Income Tax Act was introduced specifically for individual and HUF tenants who pay high rents. Unlike corporate TDS (which requires TAN registration), Section 194IB is designed to be simple enough for salaried professionals to comply with — no TAN needed, no monthly filing, and the entire process is online.
Despite this, most Mumbai tenants paying ₹50,000+ rent are either unaware of this obligation or skip it. This guide covers exactly when TDS applies, how to deduct and deposit it, and what happens if you do not comply.
When Does TDS on Rent Apply?
| Condition | Details |
|---|---|
| Monthly rent exceeds | ₹50,000 |
| Tenant type | Individual or HUF (not a company) |
| TDS rate (with PAN) | 5% of monthly rent |
| TDS rate (without PAN) | 20% of monthly rent |
| TAN required? | No — use PAN of tenant and landlord |
| Applies to | Rent payments only — not security deposit |
| Filing form | Form 26QC on the Income Tax portal |
Only if your monthly rent exceeds ₹50,000. For a typical 2BHK in Borivali or Kandivali at ₹20,000–₹30,000/month, TDS does not apply. But for a 2BHK in Bandra at ₹60,000 or a 1BHK in Lower Parel at ₹55,000, TDS is mandatory.
How TDS on Rent Works — Step by Step
Deduct 5% from Rent Before Paying
If your rent is ₹60,000/month, deduct ₹3,000 (5%) and pay the landlord ₹57,000. The landlord receives the net amount.
File Form 26QC Online
Go to eportal.incometax.gov.in → e-File → e-Pay Tax → Form 26QC. Enter your PAN, landlord’s PAN, rent details, and TDS amount. File within 30 days of the end of the financial year or end of tenancy.
Pay the TDS Amount via Challan
Payment is made online through the portal via net banking, UPI, or debit card. No physical challan needed.
Download Form 16C
After filing 26QC, download Form 16C (TDS certificate) from the portal. Give this to the landlord. The landlord needs it to claim TDS credit in their tax return.
TDS Calculation Examples — Mumbai
| Monthly Rent | Annual Rent (11 months) | TDS per Month (5%) | Total TDS for Agreement | Landlord Receives/Month |
|---|---|---|---|---|
| ₹50,000 | ₹5,50,000 | ₹2,500 | ₹27,500 | ₹47,500 |
| ₹60,000 | ₹6,60,000 | ₹3,000 | ₹33,000 | ₹57,000 |
| ₹75,000 | ₹8,25,000 | ₹3,750 | ₹41,250 | ₹71,250 |
| ₹1,00,000 | ₹11,00,000 | ₹5,000 | ₹55,000 | ₹95,000 |
| ₹1,50,000 | ₹16,50,000 | ₹7,500 | ₹82,500 | ₹1,42,500 |
Common Scenarios in Mumbai
IT Professional Relocating to Mumbai
A software engineer moves to a 2BHK in Powai at ₹55,000/month. Monthly TDS: ₹2,750. The tenant deducts this from each month’s rent and files Form 26QC before March 31 of the financial year. Make sure the TDS clause is in the agreement.
Rent Increases from Below to Above ₹50,000
If your rent was ₹45,000 and the landlord increases it to ₹55,000 at renewal, TDS becomes applicable from the month the new rent starts. The new registered agreement should include the TDS clause.
NRI Landlord
If the landlord is an NRI, a different section applies — Section 195, not 194IB. The TDS rate for NRI landlords is 30% (or as per DTAA). The tenant must obtain a TAN in this case. This is common in Mumbai where many property owners are based abroad.
Multiple Tenants Sharing a Flat
If 3 tenants share a flat at ₹75,000/month and each pays ₹25,000, TDS does not apply because each individual’s payment is below ₹50,000. However, if the agreement lists one tenant as the licensee paying ₹75,000, that tenant must deduct TDS.
What Should Be in the Agreement
If rent exceeds ₹50,000, the Leave and License agreement should include a TDS clause specifying:
- That the tenant will deduct TDS at 5% under Section 194IB
- The landlord’s PAN (mandatory — without PAN, TDS jumps to 20%)
- That the tenant will issue Form 16C to the landlord
- That the net rent payable is after TDS deduction
propdeed automatically includes the TDS clause when the rent amount entered in the form exceeds ₹50,000.
Penalties for Non-Compliance
- TDS not deducted: Interest at 1% per month from the date it was deductible
- TDS deducted but not deposited: Interest at 1.5% per month
- Form 26QC not filed: Late fee of ₹200/day under Section 234E (capped at TDS amount)
- Penalty under Section 271C: Equal to the TDS amount not deducted
Impact on Stamp Duty
TDS has no impact on stamp duty calculation. Stamp duty is calculated on the full rent amount (before TDS deduction). The propdeed calculator uses the gross rent to compute stamp duty.
TDS and Police Verification
TDS compliance and police verification are independent obligations. Police verification is mandatory for all Mumbai tenants regardless of rent amount. TDS is only for rents above ₹50,000.
Register Your Rent Agreement with TDS Clause
Rent above ₹50,000? propdeed auto-includes the TDS clause. Doorstep biometric anywhere in Mumbai.
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