TDS on Rent: Section 194-IB and 194-I Rules, Rates and Due Dates
When tenants must deduct TDS on rent, the current 2% rate under 194-IB, Form 26QC filing and penalties for missing it.
TDS on rent for FY 2025-26 (AY 2026-27) generally applies when rent exceeds ₹50,000 per month. Individuals and HUFs outside Sec. 194-I Income-tax Act deduct 2% under Sec. 194-IB Income-tax Act. Businesses and other covered payers deduct 10% for buildings or 2% for machinery under Sec. 194-I Income-tax Act. The correct route depends on the tenant’s status, the landlord’s residency and the asset rented.
Who must deduct TDS on rent?
The tenant must deduct TDS under the section applicable to their status, provided the landlord is resident in India and the relevant rent threshold is crossed.
For FY 2025-26, the Income-tax Act, 1961 continues to govern these deductions.
| Point | Sec. 194-IB Income-tax Act | Sec. 194-I Income-tax Act |
|---|---|---|
| Covered tenants | Individuals/HUFs not covered by Sec. 194-I | Companies, firms and other covered payers, including qualifying individuals/HUFs |
| Threshold | Rent exceeding ₹50,000 for a month or part of a month | Rent exceeding ₹50,000 for a month or part of a month, from FY 2025-26 |
| Land/building rate | 2%, effective 1 October 2024 | 10% |
| Machinery, plant or equipment | Not covered | 2% |
| Furniture or fittings | Not independently covered | 10% |
| Deduction pattern | Normally once, in the final month | At each credit or payment, whichever is earlier |
| TAN required? | No | Yes |
| Filing route | Form 26QC | Challan payment and quarterly Form 26Q |
| Certificate | Form 16C | Form 16A |
“Under tax audit” is only shorthand, not the statutory test. An individual/HUF falls under Sec. 194-I Income-tax Act if business turnover exceeded ₹1 crore or professional gross receipts exceeded ₹50 lakh in the immediately preceding financial year. Higher tax-audit exemptions do not change these TDS-specific limits.
How does the ₹50,000 threshold work?
The threshold determines whether deduction applies; it is not an exemption to subtract before calculating TDS.
At ₹60,000 monthly rent, calculate TDS on ₹60,000, not merely the ₹10,000 excess. Rent of exactly ₹50,000 per month does not cross the threshold.
For Sec. 194-I Income-tax Act, the earlier ₹2,40,000 annual threshold was replaced from 1 April 2025 by ₹50,000 for a month or part of a month. Accordingly, the old annual test should not be used for FY 2025-26.
Both provisions can cover residential or commercial premises. Sec. 194-I Income-tax Act also has a wider definition covering specified assets, whether or not the payee owns them.
These sections apply to resident landlords. Rent paid to a non-resident requires examination under Sec. 195 Income-tax Act instead. Do not automatically apply the 2% rate or Form 26QC merely because the tenant is an individual.
How do you deduct and file under Sec. 194-IB?
Deduct the year’s TDS in March, or the final month of an earlier-ending tenancy, and report and pay it through Form 26QC.
Follow these steps:
- Confirm eligibility: Check the tenant’s preceding-year business turnover or professional receipts and the landlord’s residential status.
- Collect details: Obtain PANs, property address, tenancy dates and the rent schedule.
- Calculate TDS: Apply 2% to the rent payable for the relevant financial-year tenancy period.
- Deduct at the correct time: Deduction is linked to credit or payment of rent for March, or the last month of tenancy where the property is vacated earlier, whichever occurs first.
- File and pay: Submit Form 26QC within 30 days from the end of the month in which deduction occurs.
- Issue the certificate: Download Form 16C from TRACES and give it to the landlord within 15 days from the due date for Form 26QC.
No TAN is required under Sec. 194-IB Income-tax Act. The Form 16C deadline runs from the Form 26QC due date, not the date you download the certificate.
What are the payment and return deadlines under Sec. 194-I?
For an ordinary non-government deductor, TDS is deposited monthly and reported through quarterly Form 26Q.
Under Sec. 194-I Income-tax Act, deduction occurs when rent is credited or paid, whichever happens first. Crediting rent to a suspense account does not postpone the obligation.
The usual deadlines are:
| Compliance | Due date |
|---|---|
| Deposit for deductions from April to February | 7th of the following month |
| Deposit for March deductions | 30 April |
| Form 26Q: April–June | 31 July |
| Form 26Q: July–September | 31 October |
| Form 26Q: October–December | 31 January |
| Form 26Q: January–March | 31 May |
| Form 16A | Within 15 days from the relevant Form 26Q due date |
Government deductors have separate deposit rules. These are statutory timelines, subject to any applicable official extension.
For quarterly compliance support, see TDS Preparation & Filing.
How much TDS applies to rent of ₹60,000 per month?
An eligible individual tenant paying ₹60,000 monthly for all twelve months deducts ₹14,400 under Sec. 194-IB Income-tax Act.
Assume a resident landlord with a valid PAN, an April 2025–March 2026 tenancy, and no separately charged GST.
| Calculation | Amount |
|---|---|
| Monthly rent | ₹60,000 |
| Annual rent: ₹60,000 × 12 | ₹7,20,000 |
| TDS: ₹7,20,000 × 2% | ₹14,400 |
| March payment to landlord after deduction | ₹45,600 |
| Total cash received by landlord over the year | ₹7,05,600 |
| Tax deposited for landlord’s credit | ₹14,400 |
The tenant’s total rent outflow remains ₹7,20,000: ₹7,05,600 goes to the landlord and ₹14,400 to the Government.
For a March 2026 deduction, Form 26QC and payment are due by 30 April 2026. Form 16C is due by 15 May 2026.
Check the calculation using our TDS on Rent Calculator.
What happens if the landlord does not provide PAN?
Without PAN, the applicable TDS rate is generally 20% under Sec. 206AA Income-tax Act, rather than the ordinary rent rate.
For Sec. 194-IB Income-tax Act, there is an important safeguard: where deduction follows Sec. 206AA Income-tax Act, the amount cannot exceed rent payable for the last month of the financial year or tenancy, as applicable.
An inoperative PAN can also trigger higher-rate consequences, subject to applicable relief. Verify PAN status before deduction rather than relying only on the lease document.
What interest, fees and penalties apply for non-compliance?
Late deduction, late deposit and late statements can produce separate liabilities, but not every consequence applies automatically.
| Default | Consequence |
|---|---|
| Failure to deduct on time | Interest at 1% per month or part-month, from when deductible until deduction, under Sec. 201(1A) Income-tax Act |
| Failure to deposit after deduction | Interest at 1.5% per month or part-month, from deduction until payment, under Sec. 201(1A) Income-tax Act |
| Late TDS statement, including Form 26QC | ₹200 per day under Sec. 234E Income-tax Act, capped at the relevant TDS amount |
| Failure to deduct | Possible penalty equal to the tax not deducted under Sec. 271C Income-tax Act |
| Late or incorrect TDS statement | Possible ₹10,000–₹1,00,000 penalty under Sec. 271H Income-tax Act, subject to statutory conditions and relief |
For deductible business expenditure, Sec. 40(a)(ia) Income-tax Act can disallow 30% of the rent expense where its conditions are met. This is not an automatic disallowance of personal residential rent.
Interest counts part-months, so a short delay can still be costly.
How SP & SC helps
SP & SC Legal and Taxation Services, Bengaluru, helps tenants identify the correct section and complete rent-TDS compliance.
We review residency, turnover, PAN status, deduction calculations, filings and corrections. Our fees are a fixed quote after reviewing the case, with scope agreed before work begins. Use our TDS Preparation & Filing service for assistance.
Frequently asked questions
Is TDS calculated on separately shown GST?
Generally, no. Separately indicated GST on services is excluded from the TDS base under CBDT Circular No. 23/2017.
Does a refundable security deposit attract TDS?
A genuinely refundable deposit ordinarily does not. Advance rent or a deposit adjusted against rent requires separate examination.
Can I wait until March under Sec. 194-I?
No. Its deduction trigger is credit or payment, whichever occurs earlier. The once-yearly mechanism belongs to Sec. 194-IB Income-tax Act.
Is TDS an additional cost for the landlord?
It is a tax credit, not a separate rent tax. The landlord reports rental income, claims eligible TDS credit and settles the final tax liability through the return.
What if the tenancy ends before March?
Under Sec. 194-IB Income-tax Act, deduct in the final month of that tenancy and calculate the Form 26QC deadline from that deduction month.
Written by
SP & SC Editorial
Editorial team at SP & SC Legal and Taxation Services — practising advocates, chartered accountants, and company secretaries publishing hands-on guidance from live client files.
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