TDS on Rent in India (2026-27)
The complete guide to Section 194I & 194IB — rates, thresholds, filing process, calculator, and how landlords can claim full credit.
TL;DR
TDS on rent is a tax that tenants deduct from rent before paying the landlord. Section 194I: Businesses deduct 10% TDS if annual rent exceeds ₹2,40,000. Section 194IB: Individual tenants deduct 5% TDS if monthly rent exceeds ₹50,000. Landlords claim credit via Form 26AS when filing ITR.
What is TDS on Rent?
TDS stands for Tax Deducted at Source. When a tenant pays rent to a landlord, the Income Tax Act requires the tenant to deduct a percentage of the rent as tax and deposit it directly with the government on behalf of the landlord.
This mechanism ensures the government collects tax at the point of transaction, rather than waiting for the landlord to file their annual return. For the landlord, the TDS amount is not lost money — it is credited against their total tax liability when filing their Income Tax Return (ITR).
TDS on rent is governed by two key sections of the Income Tax Act:
- Section 194I — Applies when a business or HUF (subject to tax audit) pays rent
- Section 194IB — Applies when an individual or HUF (not subject to tax audit) pays rent
Section 194I vs 194IB — Quick Comparison
This is the most important table every landlord and tenant in India should know:
| Parameter | Section 194I | Section 194IB |
|---|---|---|
| Who deducts? | Business / HUF (under audit) | Individual / HUF (no audit) |
| Threshold | ₹2,40,000 per year | ₹50,000 per month |
| TDS Rate (Land/Building) | 10% | 5% |
| TDS Rate (Plant & Machinery) | 2% | N/A |
| TAN Required? | Yes | No (PAN of landlord suffices) |
| Filing Form | Form 26Q (Quarterly) | Form 26QC (Per transaction) |
| Certificate Issued | Form 16A | Form 16C |
| Due Date | 7th of next month | Within 30 days from end of month |
🧮 TDS on Rent Calculator
Use this free calculator to instantly find out how much TDS needs to be deducted on your rent payment.
Section 194I — TDS on Rent by Businesses
Section 194I applies when a business entity, company, firm, or HUF (that is liable for tax audit) pays rent for any land, building, furniture, fittings, plant, or machinery.
Key Rules Under Section 194I
- Threshold: TDS is mandatory if total rent paid or credited during the financial year exceeds ₹2,40,000
- Rate for land/building/furniture: 10%
- Rate for plant & machinery: 2%
- TAN: The deductor must obtain a TAN (Tax Deduction and Collection Account Number)
- Filing: Quarterly return via Form 26Q
- Due date for deposit: 7th of the following month (31st March for March deductions)
- Certificate: Form 16A to be issued to the landlord within 15 days from the due date of filing
💡 Important: Even if rent is paid monthly, the ₹2,40,000 threshold is calculated on the aggregate annual amount. So if monthly rent is ₹20,000 (annual = ₹2,40,000), TDS is not required. But ₹20,001/month would cross the threshold.
Section 194IB — TDS on Rent by Individuals
Introduced in 2017, Section 194IB was created to bring high-rent individual tenants into the TDS framework. Before this, only businesses had to deduct TDS on rent.
Key Rules Under Section 194IB
- Applies to: Individuals or HUFs who are not liable for tax audit
- Threshold: Monthly rent exceeds ₹50,000
- Rate: 5% on total rent paid
- No TAN required: The tenant uses their PAN to file and pay
- Filing: Form 26QC — filed once per transaction (not quarterly)
- When to deduct: At the end of the financial year OR the last month of tenancy, whichever is earlier
- Certificate: Form 16C generated from TRACES portal after filing 26QC
📌 Example: You are an individual paying ₹75,000/month rent for your flat. At the end of your lease (say 12 months), you must deduct 5% TDS on total rent paid (₹75,000 × 12 = ₹9,00,000). TDS = ₹45,000. File Form 26QC and deposit ₹45,000 with the government.
How to File TDS on Rent — Step-by-Step
For Individuals (Section 194IB — Form 26QC)
- Visit incometax.gov.in
- Navigate to e-Pay Tax → Payment of TDS on Rent (Form 26QC)
- Enter your PAN and the landlord's PAN
- Fill in the rental details:
- Address of property rented
- Tenancy period (start date → end date)
- Monthly rent amount
- Total rent paid or payable
- The system will auto-calculate TDS at 5%
- Pay using Net Banking, Debit Card, or NEFT/RTGS
- Download the Form 26QC acknowledgement
- After 4-5 days, log into TRACES to generate Form 16C
- Issue Form 16C to your landlord
For Businesses (Section 194I — Form 26Q)
- Obtain a TAN (Tax Deduction and Collection Account Number) if you don't have one
- Deduct TDS at 10% from each monthly rent payment
- Deposit TDS via Challan 281 by the 7th of the following month
- File quarterly return Form 26Q on TRACES
- Issue Form 16A to the landlord within 15 days of filing the quarterly return
How Landlords Claim TDS Credit
If TDS has been deducted from your rental income, here's how to ensure you get full credit:
- Collect the TDS certificate — Form 16C (from individual tenants) or Form 16A (from business tenants)
- Verify in Form 26AS — Log into the Income Tax portal → My Account → View Form 26AS. Every TDS deduction by your tenant should appear here.
- Cross-check with AIS — The Annual Information Statement (AIS) now also shows TDS details. Match both sources.
- Declare rental income in your ITR — Under "Income from House Property" (for personal property) or "Business Income" (if renting is your business)
- Claim TDS credit — The TDS amount automatically offsets your tax liability. If TDS exceeds your tax due, you'll receive a refund.
✅ Pro Tip: Always verify Form 26AS before the ITR filing deadline. If your tenant's TDS payment doesn't reflect, contact them immediately to file/correct their Form 26QC or 26Q. Mismatch between your declared TDS and Form 26AS is a common reason for tax notices.
When TDS on Rent is NOT Applicable
TDS does not need to be deducted in the following situations:
- 194I: Annual rent is ₹2,40,000 or less
- 194IB: Monthly rent is ₹50,000 or less
- Landlord is the Central/State Government or a local authority
- Landlord has a Nil/Lower Deduction Certificate under Section 197
- The payment is not classified as "rent" (e.g., hotel accommodation for a few days, warehouse short-term storage)
- Both parties are individuals not subject to tax audit and rent is below ₹50,000/month
Penalties for Not Deducting TDS on Rent
Non-compliance with TDS provisions can result in significant financial consequences:
| Violation | Penalty / Interest | Section |
|---|---|---|
| Non-deduction of TDS | 1% per month interest (from due date to deduction date) | 201(1A) |
| Late deposit after deduction | 1.5% per month interest (from deduction to deposit date) | 201(1A) |
| Failure to deduct TDS | Penalty equal to TDS amount | 271C |
| Late filing of TDS return | ₹200/day (capped at TDS amount) | 234E |
| Business expense disallowance | 30% of rent disallowed as expense | 40(a)(ia) |
No PAN / Aadhaar? Higher TDS Rates Apply
If the landlord does not provide their PAN or Aadhaar to the tenant, higher TDS rates apply under Section 206AA:
| Scenario | TDS Rate |
|---|---|
| Landlord provides valid PAN | Normal rate (10% or 5%) |
| Landlord does NOT provide PAN | 20% (Section 206AA) |
| Landlord's PAN is inoperative (not linked with Aadhaar) | 20% |
⚠️ Warning: Since 1st July 2023, PAN cards not linked with Aadhaar are treated as "inoperative". If your landlord's PAN is inoperative, you must deduct TDS at 20% instead of the normal rate. Always verify your landlord's PAN status before deducting.
TDS on Rent When GST is Applicable
A common question landlords face: Should TDS be calculated on the rent amount including GST or excluding GST?
The answer depends on how the invoice is structured:
- If the invoice separately shows GST → TDS is deducted on the rent amount only (excluding GST)
- If the invoice does not separately show GST → TDS is deducted on the total amount (including GST)
📌 Example: If monthly rent is ₹1,00,000 + 18% GST = ₹1,18,000, and the invoice shows GST separately, then TDS @ 10% is calculated on ₹1,00,000 (not ₹1,18,000). TDS = ₹10,000. This is as per CBDT Circular No. 1/2014.
Related: Read our complete guide to GST on Commercial Rent →
Frequently Asked Questions
What happens if the tenant does not deduct TDS on rent?
The tenant becomes liable to pay interest at 1% per month from the date TDS was deductible until the date of actual deduction. Additionally, 30% of the rent paid may be disallowed as a business expense under Section 40(a)(ia).
Can TDS on rent be deducted on a monthly basis under Section 194IB?
Technically, Section 194IB requires TDS to be deducted at the time of credit of rent in the last month of the previous year or the last month of tenancy, whichever is earlier. However, many tenants prefer to deduct and deposit monthly for better cash flow management, which is also accepted.
Is TDS applicable on security deposits?
No, TDS is not applicable on refundable security deposits as they are not considered "income" of the landlord. However, if the security deposit is adjusted against rent (i.e., non-refundable), TDS would apply on that adjusted amount.
What if I have multiple landlords (co-owners)?
If the property has co-owners and rent is paid to each co-owner separately, the ₹50,000/month threshold (Section 194IB) or ₹2,40,000/year threshold (Section 194I) applies to each co-owner individually. You would need to file separate Form 26QC for each landlord.
Is TDS on rent applicable for NRI landlords?
Yes, but under Section 195, not 194I/194IB. When paying rent to an NRI landlord, TDS must be deducted at the applicable slab rates (not flat 10% or 5%). The NRI can apply for a lower deduction certificate under Section 197 to reduce the TDS burden.
Can the landlord request lower TDS deduction?
Yes. Under Section 197, the landlord can apply to the Assessing Officer for a Lower Deduction Certificate or a Nil Deduction Certificate. This is common when the landlord's total taxable income is below the basic exemption limit or when they have significant deductions/losses to set off.
What is the due date for depositing TDS on rent?
Section 194I: TDS must be deposited by the 7th of the following month (e.g., TDS deducted in July must be paid by 7th August). For March, the due date is 30th April. Section 194IB: TDS must be deposited within 30 days from the end of the month in which TDS was deducted.
How does MyProperty help with TDS tracking?
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