🏠 Introduction
Renting out a property? Or paying rent for office space, plant, equipment, or residential accommodation? Then you must understand the TDS on Rent provisions under the Income Tax Act, 1961.
In India, TDS (Tax Deducted at Source) on rent is mandatory under specific thresholds and conditions, helping the government track rental income at the source and ensure tax compliance.
Let’s break down the applicability, TDS rates, and filing procedures to help you stay compliant in FY 2025-26.
📘 What is TDS on Rent?
TDS on Rent is governed under:
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Section 194-I – Applicable to businesses and professionals
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Section 194-IB – Applicable to individuals and HUFs (not liable for tax audit)
Rent includes payments for:
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Land or Building (commercial/residential)
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Machinery or Equipment
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Plant or Furniture
✅ Applicability of TDS on Rent
🔹 Section 194-I (Business/Professional Deductors)
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Who is required to deduct?
Any person (other than individuals/HUF not liable for tax audit) paying rent to a resident exceeding ₹2,40,000 per annum. -
Examples:
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Businesses renting office spaces
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Professionals leasing equipment
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Companies using warehouses
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🔹 Section 194-IB (Individual/HUF Deductors)
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Who is required to deduct?
Individuals/HUFs not liable for tax audit but paying monthly rent exceeding ₹50,000. -
Key Point:
TDS is deducted once in a financial year (usually with last month's rent).
📊 TDS Rates on Rent in 2025
| Nature of Rent | Section | TDS Rate |
|---|---|---|
| Rent of Land/Building | 194-I | 10% |
| Rent of Plant/Machinery | 194-I | 2% |
| Rent > ₹50,000 by Individual | 194-IB | 5% |
⚠️ If PAN is not furnished by the landlord, TDS must be deducted at 20%.
📅 When to Deduct TDS on Rent?
| Section | Deduction Time |
|---|---|
| 194-I | At the time of credit or payment, whichever is earlier |
| 194-IB | At the time of payment in the last month of the financial year or lease termination |
📂 TDS Deposit & Filing Due Dates
💵 Deposit of TDS
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Section 194-I: By 7th of next month
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Section 194-IB: Within 30 days from the end of the month in which tax was deducted (Form 26QC)
📑 TDS Return Filing
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For 194-I:
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File quarterly TDS returns in Form 26Q
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For 194-IB:
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No return required — only file Form 26QC
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📄 TDS Certificates to be Issued
| Section | Certificate | Due Date |
|---|---|---|
| 194-I | Form 16A | Within 15 days from due date of TDS return filing |
| 194-IB | Form 16C | Within 15 days from filing of Form 26QC |
🔍 Practical Example
Scenario: A business pays ₹1,00,000 monthly for office rent.
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Total rent in FY = ₹12,00,000
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TDS @10% = ₹1,20,000 deducted over the year
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File Form 26Q quarterly and issue Form 16A to landlord
Scenario 2: An individual pays ₹60,000/month for residential rent
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Total rent = ₹7,20,000
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TDS @5% under 194-IB = ₹36,000
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Deduct TDS in March or lease end month, file Form 26QC, issue Form 16C
🚫 Penalty for Non-Compliance
| Default Type | Consequence |
|---|---|
| Failure to deduct TDS | Interest @ 1% per month |
| Failure to deposit TDS | Interest @ 1.5% per month |
| Late filing of returns | Penalty up to ₹200/day (Sec 234E) |
| Failure to issue Form 16A/C | ₹100/day u/s 272A (max ₹10,000) |
🧠 Tips to Stay Compliant
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✅ Check PAN of landlord before deducting
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📅 Keep track of due dates for deposits and returns
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🧾 Maintain rent agreement as proof of TDS applicability
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📤 Use online TDS portals for easy filing (TRACES & TIN-NSDL)
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🤝 Hire a TDS compliance consultant (like Verotus LLP 😉)
🏢 How Verotus Finlegal Solutions LLP Can Help You
At Verotus Finlegal Solutions LLP, we offer:
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Accurate TDS deduction & deposit assistance
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Filing of Form 26Q & 26QC
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Timely generation of Form 16A / 16C
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Legal compliance support and PAN verification
Avoid hefty penalties and keep your rental transactions tax-compliant with our expert support.
📝 Conclusion
Whether you're an individual renting a house or a business leasing commercial space, TDS on rent is a key aspect of tax compliance in India. With correct application of rates, timely deduction, and proper filing, you can avoid unnecessary legal troubles and stay in good books with the Income Tax Department.
📞 Need Help with TDS on Rent?
Contact our experts at Verotus Finlegal Solutions LLP
🌐 www.verotusllp.com
📧 verotusllp@gmail.com
📍 Kolhapur, Maharashtra
📞 +91-7066336680
