TDS on rent is governed by Sections 194I and 194IB of ITA 2025. Understanding which section applies to you depends on whether you are a business entity or an individual paying rent. Both sections have different rates, thresholds, and compliance procedures.
Section 194I: TDS by Businesses and Non-Individuals
Who must deduct?
Any person (other than individual/HUF not subject to tax audit) paying rent exceeding Rs. 2,40,000 per year to a resident must deduct TDS under 194I.
Rates
| Nature of Rent | TDS Rate |
|---|---|
| Land, building, furniture/fittings | 10% |
| Plant and machinery, equipment | 2% |
Key Points
- TDS is on total annual rent, deducted at time of credit or payment (whichever earlier)
- If the landlord has a lower deduction certificate, deduct at certificated rate
- TDS return: Form 26Q quarterly
- Certificate: Form 16A
Section 194IB: TDS by Individuals/HUF (Non-Tax Audit)
Individuals and HUFs not under tax audit must deduct TDS if monthly rent to a resident individual exceeds Rs. 50,000.
Rate and Filing
- TDS Rate: 5% on last month's rent OR when vacating (not monthly)
- Must be deducted once at end of Tax Year or when tenancy ends
- Deposited via Form 26QC (challan-cum-statement) — no quarterly return required
- Certificate issued: Form 16C
- PAN of landlord mandatory; if not available, TDS at 20%
Comparison: 194I vs 194IB
| Feature | 194I | 194IB |
|---|---|---|
| Applicable to | Companies, firms, LLPs, tax-audited entities | Individuals/HUF not under tax audit |
| Threshold | Rs. 2,40,000/year | Rs. 50,000/month |
| Rate (property) | 10% | 5% |
| When to deduct | Monthly at credit/payment | Last month / vacating |
| Filing | Form 26Q (quarterly) | Form 26QC (once) |
| Certificate | Form 16A | Form 16C |
Consequences of Non-Compliance
- Interest: 1% per month (non-deduction) or 1.5% per month (non-deposit)
- Penalty equal to TDS amount not deducted/deposited
- For 194IB: late filing fee Rs. 200/day + penalty up to Rs. 1 lakh
GST and TDS on Rent
GST (18%) applies on commercial property rent above Rs. 20 lakh (aggregate supplies). TDS under ITA 2025 is computed on the base rent amount excluding GST — GST component should not be included in TDS computation.
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