Tenants Must Withhold

The obligation to withhold arises under Section 194‑IB of the Income‑tax Act and applies specifically to Individuals and Hindu Undivided Families who are not required to get their accounts audited; the provision requires the deduction at the time of payment or credit for the last month of the previous year or the last month of the tenancy, whichever is earlier. (taxguru.in)) Tenants must deposit the withheld tax and file Form 26QC (a challan‑cum‑return) within 30 days of the month‑end in which the deduction is made, and the portal allows filing without a TAN by using the tenant’s PAN. (eztax.in)) If a landlord fails to furnish a PAN, the tenant is required to withhold at the higher rate under Section 206AA (commonly applied as 20%), while payments to non‑resident landlords are governed by Section 195 (and often require TAN and quarterly reporting such as Form 27Q). (nbaoffice.com)) The 2% levy reflects a cut from the earlier 5% rate announced in the Union Budget 2024 effective 1 October 2024, and that mid‑year change produced practical disputes about which rate applied for months before October. (economictimes.indiatimes.com)) Advisers and firms have urged tenants in high‑rent contracts to build liquidity through the year rather than face a single year‑end withholding, noting that late deposit or non‑deposit can attract interest and penalties and trigger tax department scrutiny. (ghar.tv)) Organisations such as housing non‑profits that lease multiple high‑value units must still follow this individual/HUF route for resident landlords but switch to Section 194‑I treatment if the payer is an audit‑liable entity, which carries different rates and ongoing withholding obligations. (taxguru.in)) Regulatory and advisory bodies have issued FAQs and alerts since March to clarify filing steps and dispute scenarios, citing past instances where failure to deduct or deposit led to tax notices and penalties for tenants and landlords alike. (economictimes.indiatimes.com))