TDS on Rent — Section 194I and 194IB Complete Guide 2026 | RushTax Blog

If you pay rent above a certain threshold in India, you are required to deduct TDS (Tax Deducted at Source) before paying the landlord. The rules differ depending on whether you are a business/company or an individual. Here is the complete guide for FY 2025-26.

Two Sections — Two Different Rules

Section	Who Deducts	Threshold	Rate
194I	Companies, firms, individuals/HUF with tax audit	₹50,000/month (₹6L/year)	10% (land/building), 2% (machinery)
194IB	Individuals/HUF without tax audit	₹50,000/month	2% (reduced from 5% in Budget 2025)

Section 194I — For Businesses and Audited Entities

Section 194I applies to:

Companies (private limited, public limited)
Partnership firms and LLPs
Individuals and HUFs whose accounts are subject to tax audit under Section 44AB

TDS Rates Under Section 194I

Type of Rent	TDS Rate
Land, building, furniture, fittings	10%
Plant and machinery, equipment	2%

Threshold

TDS is deducted if the total rent paid or payable to a single landlord exceeds ₹50,000 per month (effectively ₹6,00,000 per year).

Important change from Budget 2025: The threshold was changed from ₹2,40,000 per year to ₹50,000 per month. This means TDS is triggered on a monthly basis, not annually.

When to Deduct

TDS is deducted:

At the time of credit to the landlord's account, or
At the time of payment, whichever is earlier

For advance rent, TDS is deducted at the time of payment.

TDS Return Filing

Businesses deducting TDS under Section 194I file:

Form 26Q — quarterly TDS return
Due dates: July 31, October 31, January 31, May 31

Section 194IB — For Individual Tenants

Section 194IB applies to individuals and HUFs who are not required to get their accounts audited under Section 44AB (i.e., most salaried individuals and small business owners below the audit threshold).

TDS Rate Under Section 194IB

2% (reduced from 5% in Budget 2025, effective from October 1, 2024)

Threshold

Monthly rent exceeds ₹50,000 per month.

When to Deduct

TDS under Section 194IB is deducted:

Once a year — in the last month of the financial year (March) or the last month of tenancy, whichever is earlier
Not monthly like Section 194I

Example:

Monthly rent: ₹60,000
Annual rent: ₹7,20,000
TDS to deduct (in March): 2% × ₹7,20,000 = ₹14,400
Amount paid to landlord in March: ₹60,000 − ₹14,400 = ₹45,600

Form 26QC — Special TDS Return for Individuals

Individuals deducting TDS under Section 194IB do not file the regular quarterly TDS return (Form 26Q). Instead, they file:

Form 26QC — a one-time challan-cum-statement

Filed online on the TIN-NSDL portal
Due within 30 days from the end of the month in which TDS was deducted
No TAN required — use your PAN

Steps to file Form 26QC:

Go to tin.tin.nsdl.com → TDS on Rent of Property
Select Form 26QC
Enter your PAN, landlord's PAN, property details, rent amount, TDS amount
Pay the TDS online via net banking
Download the acknowledgement (Form 16C for landlord)

Form 16C — TDS Certificate for Landlord

After filing Form 26QC, download Form 16C from the TRACES portal and provide it to your landlord. This is the TDS certificate for rent.

What Happens If You Don't Deduct TDS?

Failure to deduct TDS on rent has serious consequences:

Consequence	Details
Interest for non-deduction	1% per month from the date TDS was due
Interest for non-payment	1.5% per month from the date of deduction to payment
Penalty under Section 271C	Equal to the amount of TDS not deducted
Disallowance of rent expense	30% of rent disallowed as business expense (for businesses)

How Landlords Claim TDS Credit

As a landlord, the TDS deducted by your tenant appears in your Form 26AS (under Part A for Section 194I or Part A1 for Section 194IB). You claim this as credit when filing your ITR.

Steps:

Download Form 26AS from the IT portal
Verify TDS entries match the rent received
Report gross rent in Schedule HP (House Property) of your ITR
TDS credit is automatically adjusted against your tax liability

If TDS exceeds your tax liability, you get a refund.

GST on Rent — Separate from TDS

TDS and GST are separate obligations:

TDS is deducted on the rent amount (excluding GST)
GST is charged on commercial rent if the landlord is GST-registered and annual rent exceeds ₹20L

Example:

Monthly rent: ₹1,00,000
GST at 18%: ₹18,000
Total invoice: ₹1,18,000
TDS (10% on rent, excluding GST): ₹10,000
Net payment to landlord: ₹1,08,000

Common Mistakes

Not deducting TDS on advance rent — Advance rent is subject to TDS at the time of payment
Deducting TDS on GST component — TDS is on rent only, not on GST
Using wrong section — Individuals without tax audit use 194IB (Form 26QC), not 194I (Form 26Q)
Missing the 30-day deadline for Form 26QC — Late filing attracts ₹200/day penalty under Section 234E
Not providing Form 16C to landlord — Landlord cannot claim TDS credit without this certificate

Frequently Asked Questions

Do I need a TAN to deduct TDS on rent under Section 194IB?

No. Individuals filing Form 26QC under Section 194IB do not need a TAN. Your PAN is sufficient.

What if my landlord refuses to give their PAN?

If the landlord does not provide PAN, TDS must be deducted at 20% (higher rate under Section 206AA). Insist on the landlord's PAN before signing the rental agreement.

Is TDS applicable on security deposit?

No. Security deposits (refundable) are not rent and are not subject to TDS. Only the periodic rent payments are subject to TDS.

What if I pay rent to multiple landlords for the same property (joint ownership)?

TDS is deducted separately for each co-owner's share of rent. If each co-owner's share is below ₹50,000/month, no TDS is required.

Paying high rent and confused about TDS compliance? I help with Form 26QC filing, TDS calculations, and landlord TDS credit reconciliation. WhatsApp for help.

Two Sections — Two Different Rules

Section	Who Deducts	Threshold	Rate
194I	Companies, firms, individuals/HUF with tax audit	₹50,000/month (₹6L/year)	10% (land/building), 2% (machinery)
194IB	Individuals/HUF without tax audit	₹50,000/month	2% (reduced from 5% in Budget 2025)

Section 194I — For Businesses and Audited Entities

Section 194I applies to:

Companies (private limited, public limited)
Partnership firms and LLPs
Individuals and HUFs whose accounts are subject to tax audit under Section 44AB

TDS Rates Under Section 194I

Type of Rent	TDS Rate
Land, building, furniture, fittings	10%
Plant and machinery, equipment	2%

Threshold

TDS is deducted if the total rent paid or payable to a single landlord exceeds ₹50,000 per month (effectively ₹6,00,000 per year).

Important change from Budget 2025: The threshold was changed from ₹2,40,000 per year to ₹50,000 per month. This means TDS is triggered on a monthly basis, not annually.

When to Deduct

TDS is deducted:

At the time of credit to the landlord's account, or
At the time of payment, whichever is earlier

For advance rent, TDS is deducted at the time of payment.

TDS Return Filing

Businesses deducting TDS under Section 194I file:

Form 26Q — quarterly TDS return
Due dates: July 31, October 31, January 31, May 31

Section 194IB — For Individual Tenants

TDS Rate Under Section 194IB

2% (reduced from 5% in Budget 2025, effective from October 1, 2024)

Threshold

Monthly rent exceeds ₹50,000 per month.

When to Deduct

TDS under Section 194IB is deducted:

Once a year — in the last month of the financial year (March) or the last month of tenancy, whichever is earlier
Not monthly like Section 194I

Example:

Monthly rent: ₹60,000
Annual rent: ₹7,20,000
TDS to deduct (in March): 2% × ₹7,20,000 = ₹14,400
Amount paid to landlord in March: ₹60,000 − ₹14,400 = ₹45,600

Form 26QC — Special TDS Return for Individuals

Individuals deducting TDS under Section 194IB do not file the regular quarterly TDS return (Form 26Q). Instead, they file:

Form 26QC — a one-time challan-cum-statement

Filed online on the TIN-NSDL portal
Due within 30 days from the end of the month in which TDS was deducted
No TAN required — use your PAN

Steps to file Form 26QC:

Go to tin.tin.nsdl.com → TDS on Rent of Property
Select Form 26QC
Enter your PAN, landlord's PAN, property details, rent amount, TDS amount
Pay the TDS online via net banking
Download the acknowledgement (Form 16C for landlord)

Form 16C — TDS Certificate for Landlord

After filing Form 26QC, download Form 16C from the TRACES portal and provide it to your landlord. This is the TDS certificate for rent.

What Happens If You Don't Deduct TDS?

Failure to deduct TDS on rent has serious consequences:

Consequence	Details
Interest for non-deduction	1% per month from the date TDS was due
Interest for non-payment	1.5% per month from the date of deduction to payment
Penalty under Section 271C	Equal to the amount of TDS not deducted
Disallowance of rent expense	30% of rent disallowed as business expense (for businesses)

How Landlords Claim TDS Credit

As a landlord, the TDS deducted by your tenant appears in your Form 26AS (under Part A for Section 194I or Part A1 for Section 194IB). You claim this as credit when filing your ITR.

Steps:

Download Form 26AS from the IT portal
Verify TDS entries match the rent received
Report gross rent in Schedule HP (House Property) of your ITR
TDS credit is automatically adjusted against your tax liability

If TDS exceeds your tax liability, you get a refund.

GST on Rent — Separate from TDS

TDS and GST are separate obligations:

TDS is deducted on the rent amount (excluding GST)
GST is charged on commercial rent if the landlord is GST-registered and annual rent exceeds ₹20L

Example:

Monthly rent: ₹1,00,000
GST at 18%: ₹18,000
Total invoice: ₹1,18,000
TDS (10% on rent, excluding GST): ₹10,000
Net payment to landlord: ₹1,08,000

Common Mistakes

Not deducting TDS on advance rent — Advance rent is subject to TDS at the time of payment
Deducting TDS on GST component — TDS is on rent only, not on GST
Using wrong section — Individuals without tax audit use 194IB (Form 26QC), not 194I (Form 26Q)
Missing the 30-day deadline for Form 26QC — Late filing attracts ₹200/day penalty under Section 234E
Not providing Form 16C to landlord — Landlord cannot claim TDS credit without this certificate

Frequently Asked Questions

Do I need a TAN to deduct TDS on rent under Section 194IB?

No. Individuals filing Form 26QC under Section 194IB do not need a TAN. Your PAN is sufficient.

What if my landlord refuses to give their PAN?

If the landlord does not provide PAN, TDS must be deducted at 20% (higher rate under Section 206AA). Insist on the landlord's PAN before signing the rental agreement.

Is TDS applicable on security deposit?

No. Security deposits (refundable) are not rent and are not subject to TDS. Only the periodic rent payments are subject to TDS.

What if I pay rent to multiple landlords for the same property (joint ownership)?

TDS is deducted separately for each co-owner's share of rent. If each co-owner's share is below ₹50,000/month, no TDS is required.

Paying high rent and confused about TDS compliance? I help with Form 26QC filing, TDS calculations, and landlord TDS credit reconciliation. WhatsApp for help.