Individuals or hindu undivided families which pay rent to Indian residents have to deduct tax from the rent that they pay to the landlords.
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How to deposit tax deducted at source (TDS) if you pay a monthly rent over Rs 50,000:
1) Deduct TDS at 5 per cent of the rent paid for the entire financial year 2017-18, at the time of credit of rent for the month of March, 2018.
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3) The tenant is not required to obtain TAN. TAN stands for tax deduction and collection account number, a 10-digit alphanumeric number allotted to those who are supposed to deduct TDS.
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4) Download and issue TDS certificate to landlord in Form no 16C from TRACES website (www.tdscpc.gov.in) within 15 days of uploading Form no 26QC.
Tenants need to deduct TDS from the payable rent because renting a house property qualifies as a source of income and thus, qualifies for tax liability. The other sources of income which qualify for tax liability are 1) salary of an individual 2) income from own business 3) income from capital gains like shares or selling of property 4) income from other sources like interest earned on investments like fixed deposits.