Section 194-I — TDS on Rent: Rates, Threshold & Rules FY 2025-26

Updated: 3 June 2026 · Income-tax Act 2025 · FY 2025-26 / AY 2026-27

Section 194-I of the Income-tax Act requires TDS deduction on rent paid for land, buildings, furniture, or fittings — at 10% — and on plant, machinery, or equipment at 2%, when the total payment exceeds ₹2,40,000 per year. The deductor is any payer other than an individual/HUF below the tax audit threshold.

10% / 2%

TDS rates under Section 194-I: 10% on land, building, or furniture — 2% on plant, machinery, or equipment. Threshold: ₹2,40,000 per financial year (effectively ₹20,000 per month).

Who Must Deduct TDS Under Section 194-I?

The obligation to deduct TDS under Section 194-I falls on any person paying rent, except:

An individual or HUF whose accounts are not required to be audited under Section 44AB (i.e., turnover/receipts below the tax audit threshold)

In practical terms, this means the following deductors must comply with 194-I:

Companies (public/private)
LLPs, partnerships, firms
Trusts, AOPs, BOIs
Individuals and HUFs whose turnover/receipts exceed the tax audit limit (₹1 crore for business; ₹50 lakh for professionals — or ₹10 crore / ₹50 lakh where digital transactions exceed 95%)
Co-operative societies, local authorities

Individuals and HUFs below the audit threshold who pay monthly rent above ₹50,000 fall under the separate Section 194-IB instead.

TDS Rates and Threshold — Section 194-I

Asset Type	TDS Rate	Annual Threshold	Payee
Land / building / furniture / fittings	10%	₹2,40,000	Resident only
Plant / machinery / equipment	2%	₹2,40,000	Resident only

The threshold of ₹2,40,000 per year is assessed per payee (landlord) per year — not per property. If you pay rent to the same landlord under two separate agreements totalling more than ₹2,40,000 per year, TDS applies. If the combined rent does not cross ₹2,40,000, no TDS is required.

Section 194-I vs Section 194-IB — Full Comparison

Feature	Section 194-I	Section 194-IB
Who deducts	Companies, LLPs, firms, trusts; individuals/HUF under audit	Individuals and HUFs NOT under tax audit
Threshold	₹2,40,000 per year	₹50,000 per month
TDS rate (land/building)	10%	2% (revised from 5% w.e.f. 1 Oct 2024)
TDS rate (machinery)	2%	Not applicable
Deduct at	Credit or payment, whichever earlier	Last month of tenancy or when vacating
TAN required	Yes	No — use PAN
Form for deposit	Challan 281 via TAN	Challan 26QC (once per year or on vacation)
TDS certificate issued	Form 16A	Form 16C

TDS on Rent — Special Situations

Sub-let Rent

If a tenant sub-lets a property to a sub-tenant and the sub-tenant pays rent to the tenant (who is an intermediate landlord), the sub-tenant must deduct TDS under Section 194-I (or 194-IB as applicable) on payments to the tenant. The tenant in turn may also be required to deduct TDS on rent paid to the original landlord. Both TDS obligations are independent of each other.

Hotels and Guest Houses

Payments to hotels and guest houses are generally treated as payment for services (not rent), and TDS under Section 194C (contracts, 2%) typically applies rather than 194-I. However, if a company enters into a long-term, regular arrangement with a hotel or guest house — paying a fixed monthly sum for reserved rooms — the arrangement may be characterised as rent, attracting Section 194-I at 10%. The key test is whether the payment is for use of space (rent-like) or for hospitality services.

Rent on Plant and Machinery

For plant, machinery, or equipment rentals, the TDS rate is only 2% under Section 194-I — the lower rate reflects that machinery rental is a business expense for the payer and the lower tax burden incentivises compliance. This includes: cranes, excavators, generators, computer hardware, vehicles leased long-term, and industrial equipment. Short-term equipment hire covered under a works contract may fall under Section 194C instead — consult the contract's characterisation.

Compliance: TAN, Challan, and Return Filing

Deductors under Section 194-I must: (1) obtain a TAN (Tax Deduction Account Number) if not already held; (2) deduct TDS at the applicable rate at the time of credit or payment, whichever is earlier; (3) deposit TDS by the 7th of the following month (or 30 April for March deductions) using Challan 281 at authorised banks or NSDL; (4) file quarterly TDS returns in Form 26Q; (5) issue Form 16A to the landlord within 15 days of the due date of filing the quarterly return.

Frequently Asked Questions

What is the difference between Section 194-I and Section 194-IB?

Section 194-I applies to persons other than individuals and HUFs (i.e., companies, LLPs, firms, trusts) AND to individuals/HUFs who are subject to tax audit — when they pay rent exceeding ₹2,40,000 per year. The TDS rate is 10% on land/building/furniture and 2% on plant/machinery. Section 194-IB applies specifically to individuals and HUFs who are NOT subject to tax audit — when they pay rent exceeding ₹50,000 per month to a resident. The rate under 194-IB is 2% (revised from 5% by Budget 2024, effective 1 October 2024). The threshold and deductor type are different — 194-I has a ₹2.4L/year threshold while 194-IB has a ₹50,000/month threshold.

Is TDS deductible on commercial property rent under 194-I?

Yes. Section 194-I applies to any rent paid for use of land, building, furniture, or fittings — which includes commercial property (offices, shops, warehouses). The rate is 10% for commercial premises. The deductor must be a company, LLP, firm, or an individual/HUF under audit, and rent must exceed ₹2,40,000 per year. Rent paid by an individual or HUF who is not under tax audit for commercial property is covered by Section 194-IB if the monthly rent exceeds ₹50,000.

Can a landlord submit Form 15G or 15H to avoid TDS under 194-I?

No. Form 15G (for non-senior citizens) and Form 15H (for senior citizens) are only applicable to interest income (Section 194A), dividends, and a few other sections — they cannot be used to claim exemption from TDS under Section 194-I on rent. The landlord cannot submit Form 15G/H to prevent TDS on rent. However, the landlord can apply to the Assessing Officer for a lower/nil TDS certificate under Section 197, which the tenant/deductor must then honour.

What happens if TDS is not deducted on rent under 194-I?

If the payer fails to deduct TDS under Section 194-I, they become an "assessee in default" under Section 201(1). Consequences: (1) The entire rent amount may be disallowed as a business expense under Section 40(a)(ia) — typically 30% of the payment is disallowed; (2) Interest at 1% per month is charged from the date on which TDS was deductible to the actual deduction date, and 1.5% per month from deduction to deposit date; (3) Penalty equal to the TDS amount can be levied under Section 271C. These penalties can be substantial for large commercial rent payments.

Is TDS under 194-I applicable on GST component of rent?

No. TDS under Section 194-I is deductible on the rent amount excluding GST. The CBDT has clarified via Circular No. 23/2017 that TDS should be deducted on the rent amount exclusive of GST, because GST is a tax collected by the landlord on behalf of the government and is not part of the income of the payee. For example, if rent is ₹1 lakh per month and GST at 18% is ₹18,000, TDS at 10% applies only on ₹1 lakh = ₹10,000. The GST of ₹18,000 is excluded from the TDS base.

TDS on Rent — Full Guide TDS Due Dates Income from House Property Section 194-C TDS on Contracts Form 16A Download TDS Return Filing (26Q)

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