Accounting Management Rules and Regulations

TDS on Housing Societies: Rules, Rates and Compliance

Published: August 29, 2025

Tax Deducted at Source (TDS) is a system by the Income Tax Department to ensure taxes are collected at the time of payment. Instead of waiting for the recipient to declare their income, a small portion of the amount is deducted upfront and deposited with the government.

Housing societies, often referred to as Resident Welfare Associations (RWAs) or Co-operative Housing Societies, now have TDS compliance as part of their regular responsibilities. Since they make payments to contractors, security staff, maintenance teams, auditors, and other service providers, many of these expenses are subject to TDS.

For management committees, knowing the TDS rules for housing society payments is essential. It not only prevents penalties and legal issues but also shows financial transparency. With societies handling extensive monthly collections and expenses, staying compliant with TDS is just as essential as maintaining routine operations.

What is TDS in Housing Societies?

In the context of housing societies, TDS means deducting a certain percentage of tax from payments before releasing them to vendors or professionals. The deducted amount is then deposited with the government on behalf of the recipient.

For example, if a society pays an architect ₹50,000, it must deduct 10% (₹5,000) as TDS and pay the balance ₹45,000.

TDS applicability in housing societies arises when payments for services such as security, maintenance, or professional fees exceed the threshold limits specified under the Income Tax Act.

Why is TDS Applicable to Housing Societies?

Housing societies are treated as separate legal entities under the law. This means they have similar tax obligations as companies or associations.

Legal obligation – The Income Tax Act requires societies to deduct TDS on specific types of payments.
Threshold limits – If a contractor’s bill exceeds ₹30,000 in a single instance or ₹1,00,000 in a year, TDS becomes mandatory. Similarly, rent exceeding ₹2,40,000 annually requires TDS deduction.
Audit Requirement – If a society’s annual receipts exceed ₹50 lakh, it is subject to tax audit, further emphasising the importance of TDS compliance.
Penalties – Non-compliance attracts interest, penalties, and disallowance of expenses while computing taxable income, which can increase the financial burden on members.

TDS Provisions for Housing Societies

Different sections of the Income Tax Act define where TDS applies to societies:

Section	Covers	Rate	Threshold
194C – Contractor Payments	Repairs, painting, civil works, lift maintenance, security, and housekeeping.	1% (individual/HUF), 2% (firm/company)	₹30,000 per contract or ₹1,00,000 annually
194J – Professional and Technical Fees	Payments to auditors, architects, lawyers, consultants, and for technical services.	10%	₹30,000 annually
194I – Rent	Payments for renting halls, parking areas, or premises.	10%	₹2,40,000 annually
192 – Salaries	If the society employs staff directly.	Based on the employee’s income slab.	N/A

These TDS provisions for housing societies help ensure all payments comply with legal and tax obligations.

TDS Applicability on Housing Societies

A society is required to deduct TDS whenever payments to vendors, contractors, or professionals cross the limits prescribed under the Income Tax Act. This usually happens in the following cases:

Vendor payments exceeding threshold: If a contractor is paid more than ₹30,000 in a single bill or over ₹1,00,000 in a year, the society must deduct TDS under Section 194C.
Annual service contracts: Payments to agencies providing ongoing services such as cleaning, security, or landscaping often exceed these limits, making TDS deduction mandatory.
Professional fees: If the society pays more than ₹30,000 annually to auditors, architects, or consultants, TDS has to be deducted under Section 194J.

Case studies:

Lift Maintenance Contractor: Suppose a society pays ₹1,20,000 annually for elevator servicing. Since the annual amount exceeds ₹1,00,000, TDS under Section 194C must be deducted.
Security Agency Payments: If the security agency is paid ₹40,000 per month (₹4,80,000 annually), the society has to deduct TDS each month before making the payment.
Auditor’s Fee: When an auditor’s annual fee is ₹50,000, TDS under Section 194J becomes applicable since it crosses the threshold.

TDS Rules for Housing Societies

The TDS rules for the housing society must be followed carefully to avoid penalties. Here are the key points every management committee should know:

PAN requirement – Deductee’s PAN must be obtained; otherwise, TDS is deducted at a higher rate.
Deposit timelines – TDS has to be deposited with the government by the 7th of the following month.
Quarterly filing – Societies must file TDS returns every quarter (Form 24Q for salaries, Form 26Q for non-salary).
Certificates – TDS certificates (Form 16/16A) must be issued to vendors or professionals as proof of deduction.
Records – Maintain challans, ledgers, and vendor details for smooth audits and compliance checks.

Exemptions & Special Considerations

Not all transactions attract TDS. The key exemptions are:

Small societies – If annual receipts are below ₹50 lakh, TDS compliance may not be mandatory.
Low-value payments – No deduction if payments are within the threshold limits.
Government bodies – Payments made to municipal corporations or government departments are exempt from this requirement.
GST impact – TDS is generally calculated on the base amount (excluding GST).

Consequences of Non-Compliance

The consequences of ignoring TDS are:

Interest – 1% per month for non-deduction, 1.5% per month for late deposit.
Penalty – It is equal to the amount of TDS not deducted or deposited.
Late filing fee – ₹200 per day under Section 234E until returns are filed.
Expense disallowance – 30% of the expense is disallowed when computing taxable income, increasing society’s tax burden.

Best Practices for Housing Societies

To stay compliant and avoid financial stress, societies can adopt these measures:

Maintain an updated vendor list with PAN and GST details.
Regularly track and review payments to identify when thresholds are crossed.
Use accounting software to simplify TDS calculations and deposits.
Consulting a chartered accountant or tax expert to ensure your housing society stays compliant with TDS rules.

Building a Culture of Compliance

TDS may seem like an added burden for housing societies, but it is a legal duty that ensures transparency and proper tax collection. Knowing the right sections, limits, and compliance rules helps societies stay penalty-free and earn members’ trust.

In the long run, treating TDS as part of responsible governance not only safeguards society legally but also strengthens its financial credibility.

Read Also: TDS on Maintenance Charges