TDS on Rent: Rates and ₹50,000 Threshold (2026)
TDS on rent at 2% and 10% above ₹50,000 a month, the 2% rule for individuals paying rent, and how 194-I and 194-IB moved to Section 393 of the new Act.
Short answer: if a business pays a resident landlord more than ₹50,000 for a month or part of a month, it deducts TDS at 10% on rent for land, buildings, furniture or fittings, and 2% on rent for plant, machinery or equipment. An individual or HUF who is not under tax audit and pays more than ₹50,000 a month for land or a building deducts 2%, once a year. Without the landlord's PAN, the rate is 20%.
The ₹50,000-a-month limit applies from 1 April 2025, when it replaced the old ₹2.4 lakh yearly limit. And from 1 April 2026 the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025: the provisions people still call Section 194-I and Section 194-IB now sit in the TDS table under Section 393 of the new Act. The rates and threshold carried over. The section numbers on your forms and in your software did not.
The rates, in one place
| Who pays | Rent for | Rate | Threshold | Old section |
|---|---|---|---|---|
| Company, firm, LLP, or individual/HUF under tax audit | Land, building, furniture, fittings | 10% | Above ₹50,000 for a month or part of a month | 194-I(b) |
| Company, firm, LLP, or individual/HUF under tax audit | Plant, machinery, equipment | 2% | Above ₹50,000 for a month or part of a month | 194-I(a) |
| Individual/HUF not under tax audit | Land or building | 2% | Above ₹50,000 for a month or part of a month | 194-IB |
| Any payer, landlord without PAN | Any of the above | 20% | Same as above | 206AA |
The individual rate was cut from 5% to 2% from 1 October 2024. Rent paid to a non-resident landlord is outside this table altogether and is taxed under different provisions.
How the ₹50,000 threshold works
The test is monthly rent, not the year's total. A firm paying ₹45,000 a month for its office pays ₹5.4 lakh a year and deducts nothing: each month is under ₹50,000. Under the old ₹2.4 lakh yearly limit it would have deducted. This is one of the commonest mistakes in books carried over from earlier years — deducting where the law no longer requires it, and annoying the landlord.
"Part of a month" matters for short leases and for the first and last month of a tenancy. Rent of ₹60,000 for half a month is above the limit.
Examples
| Payment | Monthly rent (₹) | TDS each month (₹) |
|---|---|---|
| Company renting an office | 65,000 | 6,500 (10%) |
| Firm hiring a printing machine | 55,000 | 1,100 (2%) |
| Firm renting a small shop | 45,000 | Nil |
Individuals paying rent: the once-a-year rule
A salaried person or a small trader who is not under tax audit and pays more than ₹50,000 a month for a house or shop deducts 2% — but only once, on the rent for the last month of the tax year or the last month of the tenancy, whichever comes first. They do not need a TAN; the tax is deposited using their PAN through the challan-cum-statement meant for this.
Example: a tenant paying ₹60,000 a month from April to March deducts 2% of ₹7,20,000 = ₹14,400 from the March rent and deposits it. The landlord receives ₹45,600 for March.
Who has to deduct
- Companies, firms and LLPs, regardless of size.
- Individuals and HUFs whose books were under tax audit in the previous year: same rules as businesses.
- Other individuals and HUFs: only the 2% annual rule above, and only for land or buildings.
When to deduct and deposit
Businesses deduct at the earlier of crediting the rent in the books or paying it. The tax is deposited by the 7th of the following month (30 April for amounts deducted in March), reported in the quarterly TDS return for non-salary payments, and the landlord gets a TDS certificate each quarter. Late deposit carries interest, and a late return carries a daily fee. For the wider compliance calendar, see the TDS compliance checklist for CA firms.
Mistakes that cost interest
- Still using the old yearly limit and either deducting where it is no longer needed, or missing a new monthly lease that crosses ₹50,000.
- Applying 10% to equipment hire, or 2% to an office, because the agreement calls everything "rent".
- Treating 194-I and 194-IB as the same rule. A firm deducts every month; an individual not under audit deducts once.
- Not collecting the landlord's PAN at the start, so the 20% rate applies and the landlord disputes it.
- Old section numbers on new-year working papers. Payments from 1 April 2026 fall under the new Act; ask your CA how the returns and challans now refer to them.
Common questions from clients
- Security deposit: a refundable deposit is not rent and is not subject to TDS; a non-refundable one may be. Look at the agreement.
- Maintenance charges billed with rent: if they are part of the rent agreement, ask your CA whether they count as rent for TDS.
- Several co-owners: the threshold is generally applied to each co-owner's share. Ask your CA for the treatment in your case.
The rules for professional fees have moved the same way; see TDS on professional fees under Section 393.
How Grovia handles TDS
Grovia's TDS feature is off until you switch it on. Each rate rule holds its section, rate, the higher no-PAN rate, and the single-bill and annual thresholds. The rates Grovia ships with stay marked unverified until your CA confirms them for your business. When you pay a bill net of tax, Grovia records the deduction and builds a quarterly register with the deposit due dates and a CSV for your CA. It does not file the return or generate the challan.
Figures checked on 1 November 2026. Tax and labour rules change, and several states are still finalising their rules under the labour codes; confirm the current position with your CA before you act on it.
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Frequently Asked Questions
What is the TDS rate on rent in 2026?
10% on rent for land, buildings, furniture or fittings, and 2% on rent for plant, machinery or equipment, when rent is above ₹50,000 for a month or part of a month. Individuals not under audit deduct 2% on rent for land or buildings.
Is TDS on rent deducted if annual rent is above ₹2.4 lakh?
Not any more. From 1 April 2025 the test is rent above ₹50,000 for a month or part of a month, not the yearly total.
Which section covers TDS on rent under the new Income-tax Act?
From 1 April 2026, the provisions formerly in Sections 194-I and 194-IB sit in the TDS table under Section 393 of the Income-tax Act, 2025.
Does an individual paying house rent need a TAN?
No. An individual or HUF not under tax audit deducts 2% once a year and deposits it using their PAN.
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