At the time of credit/payment for the last month of the financial year (March), or

At the time of vacating the property, whichever is earlier.

Log in to the Income Tax e-filing portal

Navigate to e-Pay Tax

Select “New Payment” → Choose “26QC – TDS on Rent of Property”

Fill in tenant and landlord details (PAN, address, etc.)

Enter tenancy details (rent amount, period, property details)

TDS @ 2%

Review details and proceed to payment

Choose payment mode (net banking / debit card / etc.)

Complete payment and download the challan (receipt)

What happens if a tenant does not deduct and deposit TDS on rent?

Interest liability: Interest at 1% per month or part thereof may apply for failure to deduct TDS, and 1.5% per month or part thereof for delay in depositing TDS after deduction.

Interest at 1% per month or part thereof may apply for failure to deduct TDS, and 1.5% per month or part thereof for delay in depositing TDS after deduction. Late filing fee: A fee of Rs 200 per day may be levied for delay in filing Form 26QC, subject to the amount of TDS.

A fee of Rs 200 per day may be levied for delay in filing Form 26QC, subject to the amount of TDS. Penalty exposure: The tax authorities may also levy penalties in appropriate cases for non-deduction or non-payment of TDS.

Common mistakes tenants make while complying with rent-related TDS provisions

Missing the threshold check (more than Rs 50,000 per month, not annual rent)

Incorrect TDS rate application or failure to consider PAN availability (20% applies if landlord PAN is not available)

Delay in depositing TDS, leading to interest and penalties ((1-1.5% monthly interest u/s 201(1A)).)

Incorrect details in Form 26QC, especially PAN or tenancy period

Failure to issue Form 16C to the landlord

Tenants who are paying more than Rs 50,000 in monthly rent should be aware of some compliance requirements before the financial year 2025-26 wraps up on March 31, 2026. Under Section 194-IB of the Act, a tenant (other than those liable to tax audit) paying monthly rent exceeding Rs 50,000 to a resident landlord must deduct TDS at 2% of the rent. The TDS rate was earlier set at 5% and was reduced in Budget 2024.Chartered Accountant Suresh Surana points out that the tax law stipulates that the tenant should deduct TDS at the time of credit or payment of rent for the last month of the financial year (typically March) or the final month of their tenancy, whichever comes first.This rule was implimented to enhance the monitoring of high-value rental transactions and to ensure better reporting of such income by property owners. Therefore, if tenants fail to deduct and deposit this TDS, landlords could face issues since the rental income reported in their ITR will not match if the rent exceeds Rs 50,000 per month. Both the landlord and tenant could also get a tax notice for not depositing the TDS.Keep reading to know what else tenants need to do.Archit Gupta, Founder & CEO - ClearTax, said to ET Wealth Online that the compliance process for tenants is designed to be user-friendly, allowing tenants to deposit TDS via Form 26QC without needing a TAN. With the rate now lowered to 2%, it strikes a balance between easing compliance for tenants and maintaining visibility into rental income.Gupta explains that the TDS on rent is not required to be deducted every month. Instead, it is deducted once annually- either:Gupta says that the deducted TDS must then be deposited within 30 days from the end of the month in which the deduction is made. Tenants can deposit such TDS by using Form 26QC.Chartered Accountant Gaurav Makhijani says that the TDS deducted by the tenant is required to be deposited within 30 days from the end of the month of deduction through Form 26QC. Additionally, the tenant must issue a TDS certificate in Form 16C to the landlord within 15 days, ensuring proper compliance with withholding tax provisions. Tenants are not required to apply for TAN and the process for PAN based challan is simple and is created via e-pay tax.Chartered Accountant Suresh Surana explained to ET Wealth Online that as per Rule 30(2B) of Income Tax Rules, 1962, the TDS on rent so deducted must be deposited with the government within 30 days from the end of the month in which the deduction is made, along with filing Form 26QC.Surana says: “Accordingly, where TDS is deducted from the rent for March 2026, the due date for depositing such TDS would ordinarily be April 30, 2026, and not March 31, 2026.”Surana says that if the tenant does not comply with the obligation, the following consequences may arise:According to Gupta, here are some common mistakes which tenants can avoid: