TDS on Rent Under explained: this guide covers what TDS on Rent Under means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Key Highlights
- Section 397 (old 194IB): Individuals/HUF paying rent above Rs 50,000/month — TDS at 2% (reduced from 5% — Budget 2024)
- Section 399B (old 194I): Companies/firms paying rent — TDS at 10% (land/building) or 2% (plant/machinery)
- Section 399B threshold: Rs 2,40,000/year
- TDS on rent is deducted annually (Section 397 for individuals) or monthly (Section 399B for businesses)
- Form 16C: TDS certificate issued by tenant to landlord under Section 397
- Form 26QC: TDS return for Section 397 transactions
1. Section 397: TDS on Rent by Individuals and HUF
Applicable when an individual or HUF (who is not subject to tax audit) pays rent to a landlord for residential or commercial property:
- Threshold: Rent exceeds Rs 50,000 per month
- TDS Rate: 2% (reduced from 5% by Budget 2024, effective 1 October 2024)
- When to deduct: At the end of the financial year OR when leaving the property — whichever is earlier
- One-time annual deduction (not monthly)
- TDS return: Form 26QC filed within 30 days
- TDS certificate: Form 16C issued to landlord within 15 days of Form 26QC
2. Section 399B: TDS on Rent by Businesses
Applicable when any taxpayer (company, firm, LLP, individual subject to audit) pays rent for use of land, building, or equipment:
- Threshold: Rs 2,40,000 per year (aggregated across the year)
- Rates: 10% (land, building, furniture, fittings); 2% (plant, machinery, equipment)
- When to deduct: Monthly or at the time of credit — whichever is earlier
- TDS return: Form 26Q quarterly
3. Comparison: Section 397 vs Section 399B
| Feature | Section 397 | Section 399B |
|---|---|---|
| Applicable to | Individual/HUF (non-audit) | All — companies, firms, audit cases |
| Threshold | Rs 50,000/month | Rs 2,40,000/year |
| Rate (land/building) | 2% | 10% |
| Rate (machinery/plant) | N/A | 2% |
| Deduction timing | Annual (at year end or exit) | Monthly (at credit/payment) |
| TDS return | Form 26QC | Form 26Q |
| TDS certificate | Form 16C | Form 16A |
4. Practical Example: Individual Paying Rent
Illustrative only. Amit rents a house in Delhi for Rs 60,000 per month (above Rs 50,000 threshold). Full year rent = Rs 7,20,000. At year end (31 March 2027), he deducts TDS: Rs 7,20,000 x 2% = Rs 14,400. He files Form 26QC within 30 days and pays Rs 14,400 to the government. He issues Form 16C to his landlord for Rs 14,400 TDS.
5. Higher TDS for No PAN Landlord
If the landlord does not provide PAN, TDS under Section 397 must be deducted at the higher of 2% or 20% — resulting in TDS of 20%. Always collect landlord PAN before making rent payments to avoid this higher rate and the associated complications.
6. Why TaxClue
TDS on rent compliance — Form 26QC filing, Form 16C issuance, and rate determination — requires precision. TaxClue assists both tenants with TDS compliance and landlords with TDS credit reconciliation. Contact us for TDS on rent advisory under ITA 2025.