194-IB TDS on Rent FY 2025-26 — 2% Rate, ₹50k Threshold, Form 26QC (Individuals/HUF)

📅 IT Act 2025 transition note: The Income-tax Act, 1961 stands repealed effective 1 April 2026 per Section 536 of the Income-tax Act, 2025. Section 194-IB consolidates under Section 393 of the Income-tax Act, 2025 along with all other non-salary TDS sections. Rate (2%, post Finance (No. 2) Act 2024 reduction from 5% effective 1 October 2024) and ₹50,000/month threshold (post Finance Act 2025) carry forward substantively unchanged. Transactions on or after 1 April 2026 must quote Section 393. See the IT Act 2025 transition reference for the full mapping.

Why Section 194-IB exists

Before 2017, individuals not running a business or profession (salaried employees, retirees) had no obligation to deduct tax at source on rent paid for personal residence. Section 194-I — the older rent TDS section — applies only to companies, firms, and individuals / HUFs subject to tax audit under Section 44AB. Forcing a salaried tenant paying ₹70,000 / month rent to obtain a TAN, file quarterly Form 26Q, and navigate full TDS compliance was disproportionate to the transaction.

Section 194-IB was inserted by the Finance Act 2017 as a targeted, simplified mechanism. It captures high-value residential rent paid by individuals + HUFs without imposing the full 194-I compliance overhead — no TAN required (PAN-only), a single annual deduction (not monthly), a single challan-cum-statement (Form 26QC) instead of quarterly returns.

Who must deduct under 194-IB

The obligation hinges entirely on the tenant’s status, not the landlord’s.

Individuals + HUFs NOT in tax audit

The 194-IB subjects are individuals + HUFs who were not subject to tax audit under Section 44AB in the immediately preceding FY. This covers:

• Salaried employees (no business turnover)
• Retirees
• Small business owners with turnover below the tax-audit threshold
• Freelancers / professionals with gross receipts below the audit threshold (currently ₹50L for professionals under presumptive scheme, ₹75L for digital-receipt cases)

Carve-out: individuals / HUFs in tax audit go under 194-I

If the individual / HUF was subject to tax audit in the preceding FY (e.g., a trader with turnover > ₹1 crore, or a professional with gross receipts > ₹50L), Section 194-IB does not apply. Section 194-I governs instead, with a TAN requirement, ₹2.4L annual threshold, monthly deduction obligation, and quarterly Form 26Q filing.

This distinction is the most common 194-IB / 194-I confusion. The status to check is the previous FY’s audit status, not the current FY’s.

The ₹50,000 monthly rent threshold

194-IB targets high-value rentals. The threshold is ₹50,000 per month or part of a month. If monthly rent equals ₹50,000 (not exceeds), 194-IB is not triggered. At ₹50,001 and above, the section applies.

Inclusion / exclusion: maintenance, parking, society charges

• If the lease agreement specifies a single composite sum paid to the landlord covering rent + maintenance + parking (e.g., ₹55,000), the whole amount is “rent” for threshold purposes.
• If the agreement separates base rent (₹45,000 to landlord) and maintenance (₹8,000 paid directly to the housing society or RWA), only the base rent (₹45,000) counts — 194-IB is not triggered.
• Restructuring a composite payment artificially into separate components purely to drop below ₹50,000 — when the maintenance recipient is connected to the landlord or the cash flow is round-tripped — can be challenged as a colourable device and the components aggregated.

Multiple co-tenants splitting rent

The threshold is evaluated on the property’s total rent, not the per-co-tenant contribution. Three flatmates paying ₹30,000 each for a ₹90,000 / month flat collectively breach the threshold. They must coordinate to deduct the correct TDS (typically pro-rata, with each co-tenant filing their own Form 26QC for their share).

Rate of TDS

Current rate: 2%

For FY 2025-26, the rate is 2% applied to the total rent paid / payable for the tenancy period within the FY.

Rate history

The original 194-IB rate (effective from 1 June 2017) was 5%. The Finance (No. 2) Act 2024 reduced the rate to 2% effective 1 October 2024. For FY 2025-26 calculations, only the 2% rate is relevant.

Landlord without PAN: 20% under Section 206AA — with a cap

Section 206AA imposes a 20% rate where the deductee fails to furnish a valid PAN. For 194-IB this would lead to an absurd outcome on a high annual rent — so the statute itself caps the total TDS at the last month’s rent. Practically: even if 20% × annual rent computes to a higher number, the tenant deducts no more than one month’s rent. The shortfall is recovered from the landlord by the department on assessment of the landlord’s return.

When to deduct + when to deposit

Once-a-year rule

Deduction is required only once per FY:

• At the time of credit / payment of rent for March (last month of FY), OR
• At the time of credit / payment of rent for the last month of tenancy if the lease ends mid-year,

whichever is earlier.

Form 26QC due in 30 days

Form 26QC (challan-cum-statement) must be filed + tax deposited within 30 days from the end of the month in which deduction is made.

Worked timelines

• Full-year tenancy at ₹60,000 / month (April 2025 → March 2026): annual rent ₹7,20,000. TDS = 2% × ₹7,20,000 = ₹14,400 deducted from the March 2026 rent payment. Form 26QC + deposit due by 30 April 2026. Form 16C to landlord by 15 May 2026.
• Mid-year termination at ₹70,000 / month (April 2025 → October 2025, 7 months): total rent ₹4,90,000. TDS = 2% × ₹4,90,000 = ₹9,800 deducted from the October 2025 rent. Form 26QC + deposit due by 30 November 2025. Form 16C to landlord by 15 December 2025.

Form 26QC walkthrough

Form 26QC is a combined challan + statement filed on the Income Tax e-filing portal. There is no separate quarterly TDS return for 194-IB transactions.

Information needed before filing

• Tenant: PAN, mobile, email, address
• Landlord: PAN, name, address
• Property: full address, total rent for the FY (or tenancy period), total period of tenancy (in months), date of tax deduction, date of payment

Payment path

Log in to the e-filing portal with the tenant’s PAN → e-Pay Tax → New Payment → “26QC (TDS on Rent of Property)” → enter all fields → pay via net-banking / NEFT / RTGS / UPI → download the challan receipt.

The portal generates an acknowledgement number that links the challan to the tenant’s PAN and the landlord’s PAN. Both can view the deduction in their respective Form 26AS / AIS / TIS records once 26QC is processed.

Form 16C — TDS certificate to landlord

Form 16C is the TDS certificate the tenant must issue to the landlord:

• Generated from the TRACES portal once Form 26QC is processed
• The tenant must register on TRACES as a taxpayer (using PAN, not TAN)
• Issued within 15 days from the due date of Form 26QC

Non-issuance triggers penalty under Section 272A(2)(g) at ₹100 per day of default, capped at the TDS amount.

Comparison: 194-IB vs 194-I vs 194-IA

Feature	194-IB (individual rent)	194-I (audited / corporate rent)	194-IA (property purchase)
Transaction	Rent	Rent	Purchase of immovable property
Payer	Individuals / HUF not in tax audit	Companies, firms, audited individuals / HUF	Any buyer
Threshold	> ₹50,000 / month	> ₹50,000 / month (Finance Act 2025; was ₹2.4L / year)	Consideration or stamp value ≥ ₹50L
Rate (FY 2025-26)	2%	10% (land / building), 2% (plant + machinery)	1%
Identifier required	PAN (no TAN)	TAN	PAN (no TAN)
Return / statement	Form 26QC (per transaction)	Form 26Q (quarterly)	Form 26QB (per transaction)
Certificate	Form 16C	Form 16A	Form 16B
Deduction frequency	Once per year	Every month / payment	Per transaction

If the landlord is non-resident — Section 195 applies instead

Section 194-IB explicitly applies only where the landlord is a resident. For NRI landlords, the tenant must:

• Obtain a TAN (PAN-only filing not permitted under Section 195)
• Deduct TDS on every rent payment (no once-a-year option)
• Apply the rate per Section 195 read with the relevant DTAA (typically 30% + applicable surcharge + cess, unless the landlord furnishes a lower-deduction certificate under Section 197 or DTAA benefit applies)
• File quarterly Form 27Q (the non-resident counterpart of Form 26Q)

Applying the simplified 194-IB process to an NRI landlord — relying only on PAN + the ₹50,000 threshold + 2% rate — is a frequent compliance default that surfaces at the landlord’s return-processing stage and results in demand notices to the tenant.

Common 194-IB mistakes

1. Tenant assumes “no TAN = no compliance” — the absence of a TAN requirement is a simplification, not an exemption. Once monthly rent exceeds ₹50,000 and the tenant is outside tax audit, 194-IB applies.
2. Deducting monthly instead of once a year — filing 12 separate Form 26QCs is legally permissible but creates unnecessary administrative load. The single-deduction-in-March (or tenancy-end month) model is the statutory design.
3. Failing to issue Form 16C — the tenant’s payment receipt is not a TDS certificate. Without Form 16C, the landlord cannot easily claim the credit, and the tenant faces Section 272A(2)(g) penalty.
4. Misjudging the threshold by artificial splitting — separating maintenance + parking into a parallel agreement when the cash flow is ultimately to the landlord can be aggregated during scrutiny.
5. Treating NRI landlords under 194-IB — must use Section 195 instead; full TAN + quarterly filing applies.
6. Forgetting the once-a-year deduction when tenancy ends mid-year — the deduction trigger shifts to the last month of tenancy if the lease ends before March.
7. Applying the old 5% rate post 1 October 2024 — the 5% rate is no longer in force; 2% is the rate for FY 2025-26.

For the broader rent-TDS context (commercial rent, plant + machinery rent, threshold mechanics for businesses), see the Section 194-I spoke. For the TRACES Form 16C download mechanics + correction statement workflow, see the TRACES Portal Walkthrough. For end-to-end 194-IB filing + Form 26QC + Form 16C handling, see the TDS Return Filing service.