TDS on Rent
Taxes apply to any individual on their income, subject to the existing tax slabs. Usually, many people consider tax to be applied to the salary they receive from a job or in some cases, to the interest earned from certain investments. However, income can be earned from sources other than your salary or investments, for example, income from renting premises.
Consider this, if you rent an apartment, you would be paying a monthly rent to the landlord. However, did you know you are meant to deduct tax on the rent to be paid and pay it to the government directly?
This tax deduction is known as TDS or Tax Deducted at Source. TDS is applied to several sources of income, including salary, bank interest, commission, etc. TDS is also applicable on rent.
TDS on rent falls under Section 194-I of the Income Tax Act. If you are a tenant and pay rent monthly, then TDS on rent is one part of the IT Act that you should familiarise yourself with.
Tax (TDS) deduction rules to keep in mind
There are a few rules that you need to keep in mind before you deduct TDS for rent payments:
- Who deducts TDS on rent? TDS on rent will be deducted by the person who pays rent to the person they are leasing a property from. What happens to the amount deducted?The amount deducted as TDS must be deposited and paid directly to the Government. When is TDS applicable?TDS on rent is applicable if the amount paid or expected to be paid is more than Rs. 2,40,000 in the said financial year. This amount was changed from Rs. 1,80,000 to the new amount in the Union Budget of 2019-2020.
- Effective 1st June 2017, it was decided that individuals or a Hindu Undivided Family that do not fall under the income tax bracket will be liable to deduct TDS of 5% on rent. This deduction can be carried out only if the rent of more than Rs. 50,000 per month is being paid to an Indian landlord.
What is Rent?
While you know the rules of paying TDS on rent, it is necessary to know and define what rent is.
Rent is a predetermined amount of money that is paid to an individual for the usage of their property. Before rental payment begins, the owner and the tenant sign a legally binding agreement that states the clauses of usage of the property.
What can one give on rent? Any property, including land, a building, a manufacturing unit, machinery, equipment like computers, furniture, fittings, etc., can be given out on rent.
Tax (TDS) Deduction Rates
How much TDS are you supposed to deduct on rent depends on the entity that is being put on rent and who is paying that rent.
Under Section 194-I, the TDS rate is bifurcated as follows:
Sr No | Payee | The item on which TDS is to be paid | Limit in Rs. | TDS rate |
---|---|---|---|---|
1 | Indian Resident | Rent on plant and machinery | 2,40,000 per year | 2% |
2 | Indian Resident | Rent on land/building/fittings/furniture | 2,40,000 per year | 10% |
3 | Indian Resident or HUF | Rent is paid by the individual or HUF who is not accountable for IT audit. | 50,000 per month | 5% |
If the landlord does not hold a Permanent Account Number or PAN, the amount applicable is 20%.

Key timelines for TDS deductions
TDS has to be deducted and paid to the government in a timely manner. We recommend noting these timelines:
- TDS on rent paid by an individual must be deducted when paying the rent. So if you pay rent on the 2nd of every month, you must deduct the TDS amount and then pay the landlord or owner.
- Payment to the government will be made within seven days from the end of the month. If you deduct TDS on rental income on the 15th of the month, the deducted amount has to be deposited with the government within seven days from the end of the month. For instance, if you paid rent on 15th June, you will pay the TDS with the government on or before 7th July.
- Just for March, this date is extended. Instead of paying it on or before 7th April, TDS payment can be made by 30th April.
For example, Manjunath rented a commercial space from Adinath Singh for Rs. 75,000 per month. As per the deed of tenancy signed on 1st Jan 2022, it was decided that he would pay the rent on the 4th of every month until the deed was valid, subject to the necessary tax deductions.
Before paying his February rent, he will need to deduct TDS. Here’s why.
The annual rent that Manjunath will pay Adinath is Rs. 9 lakhs per annum, which is more than the limit of Rs. 2.4 lakhs as set by the government. The percentage applicable under section 194-I is 10% for an individual who has rented land.
The rent TDS rate of 10% from Rs. 75,000 makes the rent payable to Rs. 67,500. The deduction of Rs. 7,500 was the TDS on rent.
Since the amount was paid on the 4th of the month, Manjunath must pay the TDS before the 7th of next month.
After the completion of each financial year, Manjunath will have to file Form 26QC. This form will detail the amount of TDS on rent that has been deducted and needs to be given to the landlord.
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Frequently Asked Questions About TDS on Rent
Who is liable to pay TDS on rent?
When it comes to TDS On rent, the first aspect to consider is who is paying the rent and the amount to be paid per year or month.
- TDS on rent payment falls under Section 194-I of the Income Tax Act. As per this act, if an individual has rented land, plant, machinery, furniture, fittings, etc., and pays Rs. 2.4 lakhs per annum as rent will be liable to deduct TDS. The rate of TDS to be deducted on plant and machinery is 2%, while the rate of TDS on land, building, and apartments is 10% of the monthly rent amount.
- According to Section 194-IB, Individuals and HUF (Hindu Undivided Family) who are not liable for tax audit will need to deduct TDS if the monthly rent is more than Rs. 50,000. The percentage to be deducted from the rent is 5%.
What is the exemption limit for TDS on rent?
The exemption for TDS on rent limit is
Sr No | Section | Tax Payer | Exemption Limit |
---|---|---|---|
1 | Section 194-I | Individuals | Rs. 2.4 lakhs per year |
2 | Section 194-IB | Individuals or HUF who are not accountable for an income tax audit | Less than Rs. 50,000 per month |
What happens if TDS is not deducted from rent?
According to the key timelines defined by the Income Tax department, the deducted TDS must be paid to the government. In case the tenant has failed to deduct TDS or failed to pay the government, interest and penalty will apply to them:
- If the tenant has failed to deduct the TDS, an additional interest of 1% per month will be required to be paid to the government by the tenant.
- If the tenant has deducted TDS and not paid the government, then an additional interest of 1.5% per month will be levied on the tenant.
- Apart from the interest, late filing fees of Rs. 200 per day or the amount of TDS, whichever is lower, will be added to the tenant.
Nature of Assets
TDS on rent paid by an individual will be applicable on an asset that has been leased. Depending on the nature of the asset, the percentage of TDS is applicable. Assets can be movable as well as immovable property.
Immovable property includes land, a building, a house, a flat, and a factory. On the other hand, movable property can include machinery, furniture, fittings, equipment, infrastructure material, etc.
Can rate of TDS be deducted while paying rent?The TDS on rent Section is Section 194-I. A TDS rate of 2% is applicable on a rent of more than Rs. 2.4 lakhs on the plant, machinery, etc.
A rate of 10% will be applicable on the rented property where the tenant is paying more than Rs. 2.4 lakhs per year.
If the tenant is a HUF or an individual not liable for a tax audit, then a TDS of 5% will be deducted from a rent of more than Rs. 50,000 per month.
What is the timeline to deduct TDS on rent?TDS will be deducted while paying the rent amount. If you are paying rent on 4th September, TDS has to be paid to the Government on or before 7th of October. However, when you deduct TDS for the rent paid on 4th March, the deducted amount has to be paid on or before 30th April.
Disclaimer:
Our content given in this article is as per the existing provisions, laws and regulations as per the Income Tax Act, 1961 and Income Tax Rules, 1962 issued thereunder. Tax laws are subject to amendments made thereto from time to time. The benefits / guidance mentioned herewith should not be considered as opinion / view of the Company. We request to seek independent view from your personal tax advisor on applicable tax benefits / guidance under the said article.