Quick answer
- If you pay rent above ₹50,000 in any month, you must deduct tax at source (TDS) before paying your landlord.
- Businesses and audit-liable individuals deduct under Section 194-I — 10% for land/building/furniture, 2% for plant and machinery.
- Ordinary individuals and HUFs (most salaried tenants) deduct under Section 194-IB — 2% on the total yearly rent, deducted once, in March or the last month of tenancy.
- Under the new Income-tax Act, 2025, these provisions are reported under Section 393. Rates and thresholds are unchanged.
Who deducts under which section (194-I vs 194-IB)
The rule splits cleanly based on who you are:
| Who you are | Which section | When it applies |
|---|---|---|
| A company, partnership, LLP, trust, or society | Section 194-I | Rent paid or credited to a landlord exceeds ₹50,000 in a month |
| An individual or HUF who was liable to tax audit under Section 44AB in the previous financial year | Section 194-I | Same ₹50,000-per-month test |
| An individual or HUF not liable to tax audit (most salaried people) | Section 194-IB | Same ₹50,000-per-month test, but TDS is taken only once a year |
| Any tenant paying rent to an NRI landlord | Section 195 | No minimum threshold — tax is deducted at 30% plus 4% cess, or the lower treaty rate |
Not sure whether you were liable to tax audit last year? Read our guide: Section 44AB is now Section 63: tax audit under the new Act. If you were, you deduct monthly under 194-I; if not, the simpler 194-IB route below is yours.
The ₹50,000/month rule explained
From 1 April 2025, the Finance Act 2025 changed the trigger for TDS on rent.
- Earlier: the threshold was ₹2,40,000 per year. TDS kicked in only when annual rent crossed that figure.
- Now: the test is ₹50,000 for a month or any part of a month. If the rent for any single month crosses ₹50,000, TDS applies.
Two points catch people out:
The test is per landlord, not per property. Suppose you rent two rooms from the same landlord and pay ₹30,000 for each. The landlord receives ₹60,000 in a month — TDS is required. But if you pay ₹40,000 each to two co-owners of one flat, no TDS applies, because neither landlord receives more than ₹50,000. The rent agreement should show the co-ownership split as proof.
A mid-year rent rise can pull you in. If your rent goes from ₹47,000 to ₹53,000 in October because of a lease revision, 194-IB compliance starts from October — the month the threshold was crossed.
Rates table
| Section | What is rented | TDS rate |
|---|---|---|
| 194-I — land, building, furniture, fittings | Land, building, factory building, furniture, fittings | 10% |
| 194-I — plant, machinery, equipment | Plant, machinery, equipment | 2% |
| 194-IB — individuals/HUFs not liable to audit | Residential or commercial rent | 2% of total annual rent |
| 206AA — landlord’s PAN not furnished | Any rent | 20% (under 194-IB, capped at the last month’s rent) |
| 195 — NRI landlord | Rent paid to a non-resident | 30% + 4% cess, or lower tax-treaty rate |
Note on the 194-IB rate: it used to be 5%. The Finance (No. 2) Act, 2024 reduced it to 2% from 1 October 2024, so all of FY 2025-26 and FY 2026-27 are at 2%. Many older blogs still say 5% — they are outdated.
A quick 194-I example
Your company pays ₹80,000/month office rent. Threshold crossed, so each month you deduct 10% (₹8,000) and pay the landlord ₹72,000. You deposit the ₹8,000 by the 7th of the next month and file Form 26Q every quarter. For March’s deduction, you get until 30 April to deposit.
How a salaried tenant complies under 194-IB, step by step
Unlike business TDS, 194-IB is designed for people who never deal with TDS otherwise. You deduct only once a year, and you do not need a TAN.
- Add up the total rent for the year (or the tenancy period). Example: ₹60,000/month × 12 months = ₹7,20,000.
- Work out the TDS. 2% of ₹7,20,000 = ₹14,400.
- Deduct it from the March rent — or from the last month of tenancy if you leave earlier. In the example, you pay the landlord ₹60,000 − ₹14,400 = ₹45,600 for March.
- Deposit the TDS with Form 26QC. This is a challan-cum-statement on the TIN-NSDL portal — you pay and report in one step. The deadline is within 30 days from the end of the month of deduction (so 30 April for a March deduction). Use your own PAN as the deductor PAN and the landlord’s PAN as the deductee PAN.
- Download and issue Form 16C to the landlord within 15 days of filing Form 26QC. Without this certificate, the landlord cannot claim credit for the tax you deposited — a common source of disputes.
- Keep your records. Save the challan, Form 26QC, and Form 16C. They are your proof if the tax department ever asks.
That is the entire annual compliance for a salaried tenant: one calculation, one deduction, one deposit, one certificate.
Penalties if you skip TDS on rent
| Situation | What it costs |
|---|---|
| TDS not deducted when required | Interest at 1% per month on the amount that should have been deducted |
| TDS deducted but deposited late | Interest at 1.5% per month on the delayed amount |
| Form 26QC (or 26Q/140 for 194-I) filed late | ₹200 per day under Section 234E, capped at the TDS amount |
One more thing salaried tenants miss: if you claim HRA exemption in your return but never deducted the TDS you owed, the department can question your HRA claim. Your employer does not deduct this TDS for you — HRA and TDS on rent are separate, and the TDS part is your own responsibility.
What changed under the Income Tax Act 2025 (Section 393)
The new Income-tax Act, 2025 (effective from tax year 2026-27, i.e. 1 April 2026 onward) moved the TDS provisions into a table format under Section 393. The substance is unchanged — same thresholds, same rates.
| Old provision | New provision |
|---|---|
| Section 194-I — plant and machinery rent | Section 393(1), Table Sl. No. 2(ii).D(a) |
| Section 194-I — land, building, furniture rent | Section 393(1), Table Sl. No. 2(ii).D(b) |
| Section 194-IB — individuals/HUFs | Reported under Section 393 (table format) |
The paperwork is also being renamed. For 194-I deductions made up to 31 March 2026 you still file the quarterly Form 26Q; from tax year 2026-27 the quarterly statement is Form 140. The quarterly certificate Form 16A becomes Form 131. For 194-IB you continue with Form 26QC. See our full list: Form 16 is now Form 130: complete new income tax form numbers.
Common mistakes to avoid
- Deducting 5% under 194-IB. The rate has been 2% since 1 October 2024. Blogs quoting 5% are stale.
- Testing the threshold per property instead of per landlord. Two co-owners receiving ₹40,000 each means no TDS, even though the flat costs ₹80,000.
- Forgetting the part-month rule. A rent that crosses ₹50,000 in any part of a month triggers TDS — the month does not need to be a full 30 days of tenancy.
- Assuming the employer handles it. For salaried tenants under 194-IB, nobody deducts on your behalf. No TAN is needed precisely because the law expects you to do it yourself with Form 26QC.
- Quoting the old section number on new-year filings. For rent paid from 1 April 2026 onward, reference Section 393 in correspondence, not 194-I/194-IB — the numbers changed even though the rules did not.
FAQ
What is the TDS rate on rent above ₹50,000 paid by an individual?
If the individual is not liable to tax audit, the rate is 2% on the total annual rent (Section 194-IB), deducted once from the March or last-month rent. If the individual was liable to audit under Section 44AB last year, Section 194-I applies instead: 10% for land/building/furniture, 2% for plant and machinery, deducted every month.
Do I need a TAN to deduct TDS on rent under 194-IB?
No. 194-IB is built for ordinary people, so no Tax Deduction Account Number is needed. You enter your own PAN as the deductor and your landlord’s PAN as the deductee in Form 26QC.
When should TDS on rent be deducted — every month or once a year?
Under Section 194-I, every month: deduct at the time of credit or payment, whichever is earlier. Under Section 194-IB, once a year: deduct from the rent of March (or the last month of tenancy, if earlier) on the total rent for the year or tenancy period.
Does the ₹50,000 threshold apply per landlord or per property?
Per landlord (per payee). What matters is the total rent one landlord receives in a month. Rent split between two co-owners is tested against each owner’s share separately.
What happens if my landlord does not give me his PAN?
You must deduct TDS at 20% under Section 206AA. Under 194-IB, this higher deduction cannot exceed the last month’s rent. Get the PAN in writing before you pay — a verbal promise is not worth the extra 18%.
What is the penalty if I don’t deduct TDS on rent?
Interest of 1% per month on the amount you should have deducted. If you deducted but deposited late, it is 1.5% per month. Filing Form 26QC late costs ₹200 per day under Section 234E, capped at the TDS amount. Both interest charges can apply together.
What is the new section number for 194-I under the Income Tax Act 2025?
The old Section 194-I provisions are reported under Section 393 of the Income-tax Act, 2025 — Table Sl. No. 2(ii).D(a) for plant and machinery, Sl. No. 2(ii).D(b) for land/building/furniture. Section 194-IB is likewise reported under Section 393. The rates and the ₹50,000/month threshold are unchanged.
Official sources
- Income-tax e-filing portal: https://www.incometax.gov.in
- CBDT / Income Tax Department: https://incometaxindia.gov.in
- TIN-NSDL (Form 26QC filing): https://www.tin-nsdl.com
- TRACES (Form 16C download): https://www.tdscpc.gov.in
Reviewed by Asuthod Rathod, CA.
Last updated: 12 October 2026
Disclaimer: Tax rules change often. Check incometax.gov.in or ask a qualified professional before you decide.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.