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
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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 is TDS on rent?
TDS (Tax Deducted at Source) on rent is a tax that tenants must deduct from their rent payment before paying the landlord. Under Section 194I, businesses/HUFs must deduct 10% TDS if annual rent exceeds ₹2,40,000. Under Section 194IB, individual tenants must deduct 5% TDS if monthly rent exceeds ₹50,000.
What is the TDS rate on rent under Section 194I?
Under Section 194I, the TDS rate on rent is 10% for land, building, or furniture/fittings. For plant and machinery, the rate is 2%. This applies when total rent paid or credited during the financial year exceeds ₹2,40,000. The deductor must have a TAN (Tax Deduction and Collection Account Number).
What is the TDS limit for rent under Section 194IB?
Under Section 194IB, TDS must be deducted by individual or HUF tenants (not subject to tax audit) when the monthly rent exceeds ₹50,000. The TDS rate is 5% on the total rent paid. TDS is to be deducted in the last month of the tenancy or at the time of vacating the property, whichever is earlier.
How do I file TDS on rent (Form 26QC)?
To file TDS on rent under Section 194IB: (1) Visit the Income Tax e-filing portal, (2) Go to e-Pay Tax > Form 26QC, (3) Enter PAN details of tenant and landlord, (4) Fill in rental details — monthly rent, period, total rent paid, (5) Pay the TDS amount using net banking/debit card, (6) Download the Form 26QC acknowledgement. After payment, generate Form 16C from TRACES to issue to your landlord.
When is TDS on rent not applicable?
TDS on rent is NOT applicable in these cases: (1) Under 194I — if total annual rent is ₹2,40,000 or less, (2) Under 194IB — if monthly rent is ₹50,000 or less, (3) If the landlord is the Government or a local authority, (4) If the tenant has obtained a lower/nil deduction certificate under Section 197.
What is the penalty for not deducting TDS on rent?
Penalties for non-deduction of TDS on rent include: (1) Interest of 1% per month from the date TDS was deductible until the date of actual deduction (Section 201(1A)), (2) Interest of 1.5% per month from the date of deduction until the date of deposit to the government, (3) Penalty equal to the TDS amount under Section 271C, (4) Disallowance of 30% of the rent as a business expense under Section 40(a)(ia).
How can landlords claim TDS credit on rent?
Landlords can claim TDS credit by: (1) Collecting Form 16C (from individual tenants) or Form 16A (from business tenants), (2) Verifying the deduction in Form 26AS on the Income Tax portal, (3) Cross-checking with Annual Information Statement (AIS), (4) Declaring rental income under 'Income from House Property' or 'Business Income' in ITR, (5) The TDS is automatically credited against total tax liability. If TDS exceeds the actual tax payable, a refund is issued.
What is the difference between Section 194I and Section 194IB?
Section 194I applies to businesses and HUFs subject to tax audit, with a 10% TDS rate and annual threshold of ₹2,40,000. TAN is required and filing is quarterly via Form 26Q. Section 194IB applies to individual/HUF tenants not under tax audit, with a 5% TDS rate and monthly threshold of ₹50,000. No TAN is needed, and filing is per-transaction via Form 26QC. Section 194I has broader scope and covers plant/machinery rent too.
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