TDS on rent is deducted by the tenant before paying the landlord: 10% on rent for land, buildings or furniture and 2% on hire of plant and machinery under section 194I, once rent goes above ₹50,000 for a month. Salaried tenants and small shopkeepers who are not under tax audit follow section 194IB instead, at 2% when monthly rent is above ₹50,000.
For FY 2025-26, both rules sit in the 1961 Act. From tax year 2026-27 rent is one of the items listed in section 393 of the 2025 Act. Buying a flat is a different section, explained on our TDS on property purchase page, and the full list of rates is in the TDS rate chart.
Quick facts
194I rate
10% land, building, furniture; 2% plant, machinery, equipment194I limit
Rent above ₹50,000 for a month or part of a month194IB rate
2% for individual or HUF tenants not under audit194IB limit
Rent above ₹50,000 a monthLandlord has no PAN
20%194IB form
Form 26QC, no TAN neededTax year 2026-27
Listed in section 393 of the 2025 Act
TDS on rent rate and limit for FY 2025-26
| Situation | Section | Rate | When it starts |
|---|---|---|---|
| Business, company, firm or audited individual renting an office, shop, godown or land | 194I(b) | 10% | Rent above ₹50,000 for a month or part of a month |
| Same tenants hiring machinery, plant or equipment | 194I(a) | 2% | Rent above ₹50,000 for a month or part of a month |
| Individual or HUF tenant not under tax audit (for example a salaried family) | 194IB | 2% | Rent above ₹50,000 a month |
| Landlord does not give PAN | 206AA | 20% | Same limits; under 194IB capped at the last month's rent |
The ₹50,000 monthly test replaced the old yearly limit of ₹2,40,000 from 1 April 2025. An office let at ₹45,000 a month therefore carries no TDS under 194I, even though the year's rent is ₹5,40,000. The 194IB rate was cut from 5% to 2% from 1 October 2024.
What section 194I of the Income Tax Act treats as rent
Rent here means any payment, by whatever name, for using land, a building (including a factory), the land around a building, furniture, fittings, machinery, plant or equipment. It covers a lease, sub-lease, tenancy or any similar arrangement. Hire of a crane, a generator on monthly hire or a warehouse rack all fall here.
- Advance rent that is adjusted against future rent carries TDS when paid.
- A refundable security deposit is not rent, so no TDS applies to it.
- GST shown separately on the landlord's invoice is left out; TDS is worked on the rent alone.
- Hiring a vehicle with a driver to carry goods or staff is a transport contract under 194C, not rent.
Worked examples: an office lease and a flat
A firm rents an office. A partnership pays ₹80,000 a month to an individual landlord who has given PAN. Each month crosses ₹50,000, so the firm deducts 10%, which is ₹8,000, and pays ₹72,000. Over twelve months it deducts ₹96,000, deposits it by the 7th of each following month (30 April for March) and reports it in Form 26Q.
The same firm hires a generator at ₹60,000 a month. That is plant and machinery, so the rate is 2%: ₹1,200 a month and ₹14,400 for the year.
A salaried tenant in a city flat. Meera pays ₹55,000 a month from April to March in FY 2025-26, a total of ₹6,60,000. She is an individual not under audit, so 194IB applies. She deducts 2% of the year's rent, ₹13,200, from the March payment and pays the landlord ₹41,800 for March. She deposits the ₹13,200 through Form 26QC by 30 April and gives the landlord Form 16C.
194IB: when individuals pay rent above ₹50,000 a month
Section 194IB catches tenants who are outside 194I: individuals and HUFs whose accounts did not need a tax audit. The tax is deducted only once in the year, from the rent of the last month of the financial year or the last month of the tenancy if the tenant moves out earlier. The tenant does not need a TAN; PAN is enough.
Pay the tax with Form 26QC on the e-filing portal inside 30 days after that month closes, then download Form 16C from TRACES and hand it to the landlord within 15 days of that due date. Late filing of 26QC attracts the ₹200 a day fee under section 234E.
Steps to pay 194IB TDS on rent payment by an individual
- Open the e-filing portal and log in using your own PAN.
- From the e-File menu pick e-Pay Tax, and select New Payment.
- Choose the option for TDS on rent of property (Form 26QC).
- Enter the landlord's PAN, address, the period of tenancy, monthly rent and the TDS amount.
- Pay through net banking or the other modes shown, and save the challan receipt.
- After the payment shows in the records, request Form 16C on TRACES and give it to the landlord.
For a business deducting under 194I, the tax goes through Challan 281 with its TAN and is reported in the quarterly Form 26Q. See how Challan 281 works.
How the Income-tax Act, 2025 handles rent TDS in tax year 2026-27
| Point | FY 2025-26 (1961 Act) | Tax year 2026-27 (2025 Act) |
|---|---|---|
| Legal home | Sections 194I and 194IB | TDS table under section 393 |
| Rates | 10%, 2%, and 2% for 194IB | Carried over unchanged |
| Monthly limit | ₹50,000 | ₹50,000 |
| Quarterly return for businesses | Form 26Q | Form 140 |
Any rent you credit or pay from 1 April 2026 onward goes under the new payment codes. Rent for March of FY 2025-26 stays under 194I or 194IB even if paid in April.
Mistakes landlords and tenants make with rent TDS
| What went wrong | How to fix it |
|---|---|
| Using the old ₹2,40,000 yearly limit for FY 2025-26 | Test each month against ₹50,000 |
| Deducting 10% on a machinery hire bill | Plant and machinery is 2% |
| Deducting TDS on the refundable deposit | Leave the deposit out; deduct only on rent and advance rent |
| Salaried tenant deducting every month under 194IB | Deduct once, from the last month's rent, at 2% of the year's total |
| Landlord's TDS missing in Form 26AS | Ask the tenant to check the PAN and file a correction |
This page gives general information about rent TDS in India, not advice on your lease. Rules are revised often, so before you deduct, run your case past a chartered accountant, or read the current rule on the e-filing portal first.
Sources we checked
- Income-tax Act, 1961, section 194I
- Income-tax Act, 1961, section 194IB
- Income-tax Act, 2025, section 393
- Income-tax Act, 1961, section 206AA
Frequently asked questions
Up to what monthly rent is there no TDS?
The TDS on rent limit for FY 2025-26 is ₹50,000 for a month or part of a month, and deduction starts only above it. It when rent is above ₹50,000 for a month or part of a month. applies under both 194I and 194IB. The earlier yearly limit of ₹2,40,000 no longer applies.
What is the 194I TDS rate?
Section 194I has two rates: 2% for plant, machinery and equipment, and 10% for land, buildings and furniture. If the landlord does not give PAN, the rate is 20%.
Is TDS deducted on rent of residential property paid by an individual?
Yes, when the rent is above ₹50,000 a month. A salaried individual deducts 2% under 194IB once a year, from the last month's rent, and files Form 26QC. Rent at or below ₹50,000 a month needs no TDS.
What is the 194IB TDS rate?
The rate is 2% for rent paid on or after 1 October 2024. Before that date it was 5%.
Should the tenant include GST when working out rent TDS?
No. If the landlord's bill lists GST as its own line, rent TDS is worked out on the rent portion only.
Does the TDS on rent limit change for tax year 2026-27?
No change in rate or limit has been made. Rent is now one line in section 393 of the new Act, and businesses report them in Form 140 instead of Form 26Q.