Income Tax

TDS on Rent: Section 194I Rules for Tenants & Landlords in India

Finin2min Tax Desk·June 2026·7 min readTDS ON RENT

If you pay rent above ₹2.4 lakh per year to a landlord, you may be legally required to deduct TDS before making the payment. Most tenants — both individuals and businesses — are unaware of this obligation. Missing it attracts interest, penalties, and disallowance of the rent expense. Here is the complete guide.

Two Sections — Two Different Rules

TDS on rent is governed by two separate sections of the Income Tax Act, depending on who the tenant is:

Section	Applicable To	Threshold	TDS Rate
194I	Companies, firms, LLPs, and individuals/HUFs liable for tax audit (business/professional income > ₹1 crore / ₹50 lakh)	₹2.4 lakh per year (₹20,000/month)	2% (plant/machinery/equipment) \| 10% (land/building/furniture)
194IB	Individuals and HUFs not liable for tax audit — i.e., salaried persons and small businesses paying rent	₹50,000 per month	2% (w.e.f. April 2025; was 5% before)

Section 194I in Detail: For Businesses

Under Section 194I, TDS must be deducted at the time of credit or payment (whichever is earlier) on rent paid for:

Land, building, or furniture/fittings: TDS at 10%
Plant, machinery, or equipment: TDS at 2%

The threshold of ₹2.4 lakh applies per payee per financial year. If you have multiple premises rented from the same landlord, aggregate all rent payments to check if the threshold is crossed.

⚠ GST on rent: If your landlord charges GST on rent (commercial property always; residential to registered business under RCM), TDS under 194I is deducted on the base rent amount excluding GST. Do not deduct TDS on the GST component.

Section 194IB in Detail: For Salaried/Individual Tenants

If you are a salaried employee or individual (not required to get tax audit) and pay rent exceeding ₹50,000 per month to a landlord, you must:

Deduct TDS at 2% of the rent in the last month of the financial year or the last month of tenancy (whichever is earlier)
Deposit the TDS using Challan 26QC on the TIN-NSDL portal within 30 days from the end of the month in which TDS was deducted
Issue Form 16C (rent TDS certificate) to your landlord within 15 days of filing the challan

Unlike 194I (which requires a TAN), 194IB deductions can be made using only your PAN — no TAN required.

Landlord's PAN: What If They Refuse to Share?

If the landlord does not provide PAN:

Under Section 194I: TDS rate becomes 20% (instead of 10%) as per Section 206AA
Under Section 194IB: TDS rate stays at 2% but deposited against the landlord's name without PAN — this may cause matching issues in the landlord's Form 26AS and create disputes

Always insist on the landlord's PAN at the time of signing the rent agreement. In practice, most landlords cooperate.

Consequences of Not Deducting TDS on Rent

Consequence	Details
Interest on late deduction	1% per month from date TDS was deductible to date of actual deduction
Interest on late deposit	1.5% per month from date of deduction to date of deposit
Disallowance of rent expense	30% of rent expenditure disallowed under Section 40(a)(ia) for businesses that fail to deduct TDS — effectively a 30% penalty on the expense claim
Penalty under Section 271C	Amount equal to TDS not deducted

How to Deposit TDS and File Returns

For businesses (194I): Deposit TDS monthly by the 7th of the following month using Challan 281 (via net banking or authorised bank). File quarterly TDS returns in Form 26Q. Issue Form 16A to the landlord within 15 days of due date of filing the quarterly return.

For individuals (194IB): One-time deduction in the last month of FY. Deposit via Challan 26QC at tin.tin.nsdl.com within 30 days of end of that month. Issue Form 16C within 15 days of Challan 26QC filing. See our TDS compliance calendar for all key deadlines across the year.

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Calculate TDS on your rent paymentUse our TDS calculator to quickly determine the deduction amount for any rent amount.

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HRA Exemption Link: The Tenant's Side

As a salaried tenant, the rent you pay also determines your HRA (House Rent Allowance) exemption from income tax. Even if you're required to deduct TDS under 194IB, you can still claim HRA exemption — but you'll need to provide your landlord's PAN to your employer if rent exceeds ₹1 lakh per year. See our HRA exemption guide for the calculation formula and documentation required.

Frequently Asked Questions

I pay ₹45,000/month rent. Do I need to deduct TDS? ▼

No. Section 194IB applies only if monthly rent exceeds ₹50,000. At ₹45,000/month, you are below the threshold and TDS deduction is not required. However, if your rent increases to ₹51,000 or more per month at any point, the TDS obligation kicks in from that month onwards.

My landlord says he's a senior citizen and doesn't pay tax. Does that exempt me from TDS? ▼

No. TDS obligations are on the payer (tenant), not determined by the payee's (landlord's) tax status. Even if your landlord has zero taxable income and files a return with nil tax liability, you are still required to deduct TDS if the rent crosses the threshold. Your landlord can claim a refund of the TDS deducted when they file their income tax return showing nil tax liability.

Can I avoid TDS on rent by splitting the payment into two accounts or paying fortnightly? ▼

No. The threshold is based on the total rent paid/credited during the financial year (for 194I) or the monthly rent amount (for 194IB). Splitting payments across accounts, making fortnightly payments, or any other structuring to avoid TDS is not valid and may be treated as tax evasion. The rent obligation is determined by the agreement terms and actual occupancy, not the payment mechanics.