I paid rent above the limit and forgot TDS: what an individual tenant can still do

You rent a flat or a shop for yourself or your family. The rent is a good deal more than a few thousand rupees a month. You have paid it on time, every month, by bank transfer. Then someone mentions TDS on rent, and you realise you never deducted any tax from what you paid your landlord.

This is a very common slip. Most individuals and Hindu undivided families (HUFs) who pay rent have never had to deduct tax before, so nobody told them. This article explains what the law actually says, what the late-payment consequences are, and the order in which to fix it.

Everything below is general information. Your facts decide the answer, so read the last section before you do anything.

First, does this rule apply to you at all?

The rule for individuals and HUFs paying rent was inserted into the Income-tax Act, 1961 as section 194-IB by the Finance Act, 2017, with effect from 1 June 2017. It applies to a person who is "an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I)". The wording carves out the individuals and HUFs referred to in the second proviso to section 194-I, so check with your CA whether that carve-out touches you.

The tax applies where that person is responsible for paying to a resident "any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year" (section 194-IB(1), Income-tax Act, 1961).

Three points to notice:

• The test is per month, not per year. Rent of ₹50,000 a month is not above the limit. Rent above ₹50,000 in even one month can bring the rule in.
• "Rent" is defined widely: any payment, by whatever name called, under any lease, sub-lease, tenancy or other agreement or arrangement for the use of land or a building or both (Explanation to section 194-IB, Income-tax Act, 1961). Do not assume it is limited to a house or flat.
• The landlord must be a resident. A payment to a non-resident landlord is a different question and needs separate advice.

Which Act applies to your rent

The Income-tax Act, 2025 applies from 1 April 2026, that is, from tax year 2026-27. Rent paid up to 31 March 2026 stays under the Income-tax Act, 1961.

The 1961-Act section 194-IB has moved into the table in section 393(1) of the Income-tax Act, 2025. The official mapping between the two Acts lists 194-IB against sections 393, 397 and 402 of the 2025 Act. In the section 393(1) table, item 2(i) covers "any income by way of rent" paid by a "person other than specified person". The threshold is again "₹ 50,000 for a month or part of a month", and the rate shown is 2% (section 393(1), Table Sl. No. 2(i), Income-tax Act, 2025).

A "specified person" is any person who is not an individual or HUF, or an individual or HUF whose total sales, gross receipts or turnover in the preceding tax year exceed one crore rupees (business) or fifty lakh rupees (profession) (section 402(37), Income-tax Act, 2025). An individual or HUF below those limits is outside "specified person" and sits in the item 2(i) group.

How much tax, and when it should have been deducted

The rate in section 194-IB(1) of the 1961 Act was five per cent when the section was inserted. The Finance (No. 2) Act, 2024 substituted "two per cent." for "five per cent." with effect from 1 October 2024. The 2025 Act table shows 2% as well.

The timing is unusual and is the reason many tenants miss it. Under section 194-IB(2), the tax is deducted once, "at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year", or at the time of payment, "whichever is earlier". Note 1 to the Table at serial 2(i) in section 393(1) of the 2025 Act says the same for the last month of the tax year or the last month of the tenancy.

So the deduction is not a monthly chore. It falls due in one go, at the end of the year or the end of the tenancy, and many tenants simply do not realise a deduction was due at all.

The sections do not give a worked example, and the amount on which the percentage is applied depends on your facts: how the rent ran through the year, whether it changed, and whether any part of the payment is not rent. Settle the figure with your CA before you pay.

What the law says happens if you did not deduct

Under the 1961 Act, failure to deduct is dealt with by section 201, which the official mapping pairs with section 398 of the 2025 Act. This article does not set out the current text of section 201 or its interest sub-section (1A), so for rent paid up to 31 March 2026 check them with your CA.

For tax year 2026-27 onwards, section 398 of the Income-tax Act, 2025 reads as follows in substance.

• A person who is required to deduct tax and does not is "deemed to be an assessee in default" for that tax, in addition to any other consequences (section 398(1)).
• Interest is simple interest "at 1% for every month or part of a month" from the date the tax was deductible to the date it is deducted, and "at 1.5% for every month or part of a month" from the date it was deducted to the date it is actually paid (section 398(3)(a)).
• That interest is to be paid before the statement is furnished (section 398(3)(b)).
• If the landlord has filed a return, included the rent in income and paid the tax on it, and you obtain the prescribed accountant's certificate, you are not treated as an assessee in default for the tax. Interest is then payable only up to the date the landlord filed the return (section 398(2) and (3)(c)).
• An order treating you as in default cannot be made after six years from the end of the tax year in which the tax was deductible, or after two years from the end of the tax year in which a correction statement is delivered, whichever is later (section 398(5)).
• Penalty is not automatic. Section 398(7) says no penalty is levied under section 412 unless the Assessing Officer is satisfied that you failed to deduct "without good and sufficient reasons". Separately, section 448 says the Assessing Officer may impose a penalty equal to the tax that was not deducted; section 398(7) does not mention section 448, so take advice on both.

Read the fourth point again. It is the practical route out for many tenants: the landlord's own return and tax payment can take the default away, and the interest then stops at the date the landlord filed.

Two features of the 1961 Act section 194-IB are worth knowing as well. The provisions of section 203A, which require a tax deduction account number (TAN), do not apply to a person deducting under this section (section 194-IB(3)). And if the landlord has not given a PAN and the higher rate under section 206AA applies, the deduction cannot exceed the rent payable for the last month of the year or tenancy (section 194-IB(4)). The Income-tax Act, 2025 table does not repeat either point in the entry for rent, so check the position with your CA before relying on either for tax year 2026-27.

Step by step: putting it right

• Write down the facts. Landlord's name and PAN, address of the property, the monthly rent, the months paid, whether rent changed, the date the tenancy ended if it has. Gather your bank statements.
• Work out whether the rule applied to you. Was any month's rent above ₹50,000? Are you an individual or HUF outside the "specified person" group? Which Act governs, the 1961 Act or the 2025 Act?
• Work out the tax. Use the rate in force for the period (two per cent from 1 October 2024 under the 1961 Act, 2% in the 2025 Act table).
• Work out the interest. Count the months or part months from the date the tax should have been deducted to the date you deduct it, then from deduction to payment. The two rates are different (1% and 1.5%).
• Pay the tax and file the challan-cum-statement. For rent under the 1961 Act, the deducted sum is paid within thirty days from the end of the month in which the deduction is made, with Form 26QC (rule 30(2B), Income-tax Rules, 1962). Under the Income-tax Rules, 2026, the equivalent challan-cum-statement is Form 141, furnished within thirty days from the end of the month of deduction, and it covers section 393(1) Table Sl. No. 2(i) (rule 219(5), Income-tax Rules, 2026). The mapping lists Form 26QC against Form 141.
• Give the landlord a certificate. Under the 2026 Rules, a certificate in Form 132 is furnished within fifteen days from the due date for furnishing the Form 141 challan-cum-statement (rule 215(1), Income-tax Rules, 2026).
• Consider the landlord's return route. If the landlord has already included the rent in a filed return and paid tax on it, ask your CA whether the accountant's certificate in section 398(2) fits your case.

What not to do

• Do not wait. Under the 2025 Act, interest runs for every month or part of a month (section 398(3)(a)). The longer you leave it, the more it costs.
• Talk to the landlord before adjusting anything. Who bears the tax is a question under your tenancy agreement. As plain prudence, read the agreement and speak to your CA before you change what you pay.
• Do not assume a missing TAN is a reason to skip it. Under section 194-IB(3) of the 1961 Act, section 203A (TAN) does not apply to a person deducting under that section. Check the position under the 2025 Act before relying on it.
• Do not guess a late fee. Section 427 of the 2025 Act sets a fee of ₹200 for every day a statement is not delivered within the time in section 397(3)(b), capped at the tax deductible. Whether it applies to the challan-cum-statement in Form 141 for your case should be confirmed before you assume it does or does not.

What to do now

• Next step: list your rent facts and confirm that rent crossed ₹50,000 in at least one month (section 194-IB(1), Income-tax Act, 1961; section 393(1) Table Sl. No. 2(i), Income-tax Act, 2025).
• Deadline: the challan-cum-statement is due within thirty days from the end of the month in which you deduct and pay (rule 30(2B), Income-tax Rules, 1962; rule 219(5), Income-tax Rules, 2026). Deducting this month starts that clock now.
• Consequence of leaving it: you can be treated as an assessee in default, with simple interest at 1% and then 1.5% per month or part of a month under the 2025 Act (section 398(1) and (3)), and a penalty is possible where there is no good and sufficient reason (section 398(7), section 412 and section 448, Income-tax Act, 2025).

Have a CA review your facts before you act or file.

Frequently asked questions

Is the limit ₹50,000 a year or a month?
It is per month. The 1961 Act refers to rent "exceeding fifty thousand rupees for a month or part of a month" (section 194-IB(1)), and the 2025 Act table uses the same wording (section 393(1), Table Sl. No. 2(i)).

I only crossed the limit for two months. Do I deduct on the whole year?
The text says the rule applies where rent exceeds the limit for a month or part of a month during the year. How the tax is measured in a year when only some months crossed the limit is a point to settle with your CA on your own facts.

What if my landlord has already paid tax on this rent?
Section 398(2) of the 2025 Act has a route for this. If the landlord filed a return, took the rent into income and paid the tax, and you get the prescribed accountant's certificate, you are not treated as an assessee in default for that tax. Interest then runs only up to the date of the landlord's return (section 398(3)(c)).

Do I need a TAN to deduct tax on rent?
Under the 1961 Act, section 203A (TAN) does not apply to a person deducting under section 194-IB (section 194-IB(3)). Check the position under the 2025 Act before you apply it to rent for tax year 2026-27.

Is there a time limit after which the department cannot act?
For the 2025 Act, an order deeming you in default for failure to deduct cannot be made after six years from the end of the tax year in which the tax was deductible, or after two years from the end of the tax year in which a correction statement is delivered, whichever is later (section 398(5)).

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