The section that applies, and the one that does not
Your landlord's status decides the route. Section 194-IB is for rent paid to a resident landlord. A payment to an NRI landlord falls under Section 393(2), formerly Section 195, with no threshold.
| Landlord | Section | Rate | TAN and filing |
|---|---|---|---|
| Resident | Section 194-IB | 2% (since 1 October 2024) where that section applies | No TAN; resident-landlord process |
| NRI | Section 393(2), formerly 195 | Rate in force, normally 30% plus cess for an individual; surcharge where applicable | TAN; Form 144, formerly Form 27Q; Form 131, formerly Form 16A |
Do not use the 5% rule because it is easier. It is not the provision for an NRI landlord.
Your monthly routine
Before paying each month's rent, deduct at the applicable rate and pay the landlord the balance. Deposit the tax by the 7th of the following month, 30 April for March. At quarter end, report the deductions in Form 144, formerly Form 27Q, and issue Form 131, formerly Form 16A, to the landlord.
Ask for the landlord's PAN and non-resident status, retain the lease and bank proofs, and reconcile the rent, tax and net credit each month. The landlord needs the reported TDS credit for their return.
A lower-deduction certificate changes the rate
The landlord may receive a certificate under Section 395, formerly Section 197, on Form 128, formerly Form 13. It can specify a lower rate or nil deduction for payments it covers.
Use the certificate only after receiving it and only within its terms and period. It is the landlord's application, but your payment record has to follow the rate it authorises. Without it, deduct at the rate in force on gross rent.
The Form 145 and Form 146 question
Form 145, formerly Form 15CA, is the pre-remittance information form under Rule 220, formerly Rule 37BB. Its published instructions describe a remittance to a non-resident: Part A applies up to Rs 5 lakh in the year, Part B above Rs 5 lakh where an assessing-officer certificate exists, Part C above Rs 5 lakh with Form 146, formerly Form 15CB, and Part D for a non-taxable payment.
Rent credited to an NRO account in India is a genuine grey area because it is an Indian-account credit, not clearly an outward remittance. The official form material does not settle that point. Ask the bank and your CA before filing or omitting Form 145; do not assume an NRO credit answers it either way.
A worked example: Arjun in Delhi
Arjun in Delhi pays Rs 60,000 rent each month to an NRI landlord. At 30% plus 4% cess, 31.2% in all, he deducts Rs 18,720, deposits it by the 7th of the next month and pays Rs 41,280 to the landlord. Over one quarter, rent is Rs 1.80 lakh, TDS is Rs 56,160 and net rent is Rs 1,23,840, which he reports in Form 144.
The landlord later gives Arjun a valid certificate at 10%. He then deducts Rs 6,000 each month, deposits Rs 18,000 over the quarter and pays Rs 1.62 lakh net for the quarter. The certificate changes future payments it covers; it does not rewrite earlier deductions.
Two mistakes that stay with the tenant
First, deducting 2% under Section 194-IB does not satisfy the NRI-landlord rule. The tenant must correct the Section 195 reporting and make up any short deduction with applicable interest.
Second, deducting tax but never depositing it leaves the tenant in default. Section 201 and Section 201(1A) provide for the tax and interest. A company tenant follows the same section, but usually already has a TAN and an established TDS process; the lease should also say clearly whether rent is quoted before or after TDS.