Section 194-I — TDS on Rent,
Rates & New ₹6L Limit
The TDS rate on rent under Section 194-I, the new ₹6,00,000 annual threshold from Budget 2025, who must deduct, how it differs from Section 194-IB, and the GST-exclusion rule.
Section 194-I requires TDS on rent for land, building, furniture or fittings at 10%, and on plant, machinery or equipment at 2%. From 1 April 2025 (Budget 2025) the annual threshold rose from ₹2,40,000 to ₹6,00,000 (₹50,000 a month). The deductor is any payer other than an individual/HUF below the tax-audit limit — such payers may fall under Section 194-IB instead. TDS is deducted on rent excluding GST.
Section 194-I — Rates & Threshold
The rate depends on what is rented. The threshold is checked per payee (landlord) per financial year, aggregating all rent to that landlord — not per property or per agreement.
| Asset rented | TDS rate | Annual threshold | Payee |
|---|---|---|---|
| Land / building / furniture / fittings | 10% | ₹6,00,000 | Resident only |
| Plant / machinery / equipment | 2% | ₹6,00,000 | Resident only |
| Payee has no PAN (Sec 206AA) | 20% | ₹6,00,000 | Resident |
Threshold raised from ₹2,40,000 to ₹6,00,000 w.e.f. 1 April 2025 (Finance Act 2025). Rent to a non-resident landlord is covered by Section 195, not 194-I. TDS applies on rent net of GST (CBDT Circular 23/2017).
Until FY 2024-25 the threshold was only ₹2,40,000 a year. From 1 April 2025 it is ₹6,00,000 (₹50,000/month). Many small commercial tenants and firms paying moderate rent are now outside 194-I. Note: once rent to a landlord crosses ₹6,00,000 for the year, TDS applies on the whole amount, not just the excess.
Who Must Deduct TDS Under 194-I?
The duty to deduct falls on any person paying rent, except an individual or HUF whose accounts are not required to be audited under Section 44AB. In practice the following must comply with 194-I:
- Companies (public or private)
- LLPs, partnership firms, AOPs, BOIs, trusts
- Individuals & HUFs whose turnover/receipts exceed the tax-audit limit (₹1 crore business / ₹50 lakh profession, or ₹10 crore where 95%+ digital)
- Co-operative societies and local authorities
Individuals and HUFs below the audit limit who pay rent above ₹50,000 a month deduct under the separate Section 194-IB at 2% instead — using their PAN, no TAN needed.
Per CBDT Circular 23/2017, TDS under 194-I is computed on the rent exclusive of GST. If rent is ₹1,00,000 and GST at 18% is ₹18,000, TDS at 10% applies only on ₹1,00,000 = ₹10,000. The GST is not part of the payee's income.
Paying rent above ₹6 lakh a year? Get your TAN, deduction & 26Q filing handled.
Talk to a TDS Expert →Section 194-I vs Section 194-IB
Section 194-I
- Deductor: companies, LLPs, firms, trusts; individuals/HUF under audit
- Threshold: ₹6,00,000 per year (Budget 2025)
- 10% land/building/furniture · 2% plant/machinery
- Deduct at credit or payment, whichever earlier
- TAN required · deposit via Challan 281 · file 26Q · Form 16A
Section 194-IB
- Deductor: individuals & HUF NOT under tax audit
- Threshold: ₹50,000 per month
- 2% (reduced from 5% w.e.f. 1 Oct 2024)
- Deduct in last month of tenancy or on vacating
- No TAN — use PAN · Challan-cum-return 26QC · Form 16C
| Feature | Section 194-I | Section 194-IB |
|---|---|---|
| Who deducts | Companies, firms, trusts; ind./HUF under audit | Individuals & HUF NOT under audit |
| Threshold | ₹6,00,000 per year | ₹50,000 per month |
| Rate — land/building | 10% | 2% |
| Rate — machinery | 2% | N/A |
| TAN needed | Yes | No · use PAN |
| Deposit / return | Challan 281 · Form 26Q | Challan 26QC |
| TDS certificate | Form 16A | Form 16C |
How Much TDS on ₹1 Lakh Monthly Office Rent?
A private company pays ₹1,00,000/month (₹12,00,000/year) as office rent to a resident landlord, plus 18% GST.
Monthly deduction (194-I)
Full-year position
Failure to deduct makes you an assessee-in-default under Section 201: 30% of the rent can be disallowed as expense under Section 40(a)(ia), interest runs at 1% per month (deductible-to-deducted) and 1.5% per month (deducted-to-deposited), and a penalty equal to the TDS can be levied under Section 271C.
TAN, Deposit & Return Filing
- Obtain a TAN if you do not already hold one
- Deduct TDS at credit or payment of rent, whichever is earlier
- Deposit by the 7th of the next month (30 April for March)
- File quarterly return in Form 26Q on TRACES
- Issue Form 16A to the landlord within 15 days of the return due date
- Deduct on rent net of GST; use 20% where the payee has no PAN
Sub-let, Hotels & Machinery
- Sub-let rent — a sub-tenant paying an intermediate landlord deducts under 194-I/194-IB; the tenant's own TDS on rent to the owner is a separate obligation.
- Hotels & guest houses — usually a service under Section 194-C (2%); only a fixed, regular room-block arrangement is treated as rent under 194-I.
- Plant & machinery — cranes, generators, leased vehicles and equipment attract the lower 2% rate; short-term hire under a works contract may fall under 194-C.
- Warehouse / cold storage — treated as rent for the building at 10% unless it is a composite service contract.
From AY 2026-27 the Income-tax Act, 2025 renumbers the 1961 Act. The rent-TDS provision of Section 194-I now sits in the new Act, but the familiar "194-I" reference, the 10%/2% rates and the ₹6,00,000 threshold are unchanged — search and departmental forms still use 194-I.
Compare every TDS section and rate in one place.
View TDS Rate Chart 2025-26 →Section 194-I — Frequently Asked Questions
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