TDS on Rent — SuperCrrew

2025 Updated Guide

TDS on Rent —
Everything You Actually
Need to Know.

194-I vs 194-IB, thresholds, rates, forms, and the 2025 changes explained in plain language. No CA jargon, just clarity.

See Full Breakdown ↓ 5 min read · Free Guide by SuperCrrew

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₹6L 194-I Threshold (2025)

₹50K 194-IB Monthly Limit

2% 194-IB Rate (Oct 2024)

10% 194-I Rate (Building)

30 Days 26QC Filing Window

What is TDS on Rent

Two sections.
One rule.

When you pay rent in India, the government requires tax to be deducted before it reaches your landlord. Two sections of the Income Tax Act govern this — and which one applies depends entirely on who you are.

🏢

Section 194-I

Applies to businesses, firms, companies, and individuals/HUFs who are subject to tax audit. You need a TAN number and must deduct TDS on a monthly basis when annual rent crosses ₹6,00,000.

For Businesses & Audit Entities

🏠

Section 194-IB

Applies to individuals and HUFs who are NOT under tax audit — typically salaried people and small landlords/tenants. No TAN needed. Just deduct once a year when monthly rent exceeds ₹50,000.

For Salaried Individuals & Small Tenants

Why does this matter?

Missing TDS deduction isn't just a mistake — it's a liability.

The IT department now links all rent payment data with your AIS and Form 26AS. High rent payments are actively tracked. If TDS isn't deducted, expect interest charges, penalties, and your rent expense being disallowed as a deduction.

⚠ Interest on late deduction ⚠ Penalty for non-compliance ⚠ Rent expense disallowed in ITR ⚠ IT notices via AIS / 26AS tracking

Side-by-Side Breakdown

194-I vs 194-IB —
Full Comparison

Everything in one table. Know exactly what applies to your situation.

	Section 194-I (Business)	Section 194-IB (Individual)
Who Deducts	Businesses, firms, companies & HUFs under tax audit	Individuals & HUFs NOT liable for tax audit (e.g. salaried people)
Threshold	Rent > ₹6,00,000 per year (Effective 1 April 2025)	Rent > ₹50,000 per month
TDS Rate	10% — Land / Building / Furniture 2% — Plant & Machinery	2% (Reduced from 5% from Oct 2024)
TAN	Mandatory	Not required — use PAN only
Frequency	Monthly or at the time of each payment	Once a year — last month of FY or tenancy
Return / Form	Form 26Q (quarterly return)	Form 26QC (challan-cum-statement)
Certificate	Form 16A (to landlord)	Form 16C (to landlord)

Latest Updates

What changed in 2025?

Four key updates that every business owner and salaried individual needs to know right now.

📈

Threshold Raised — Section 194-I

The annual rent limit for 194-I has been raised from ₹2,40,000 to ₹6,00,000 per year. Fewer small businesses now need to deduct TDS — reducing compliance burden for SMEs significantly.

Effective 1 Apr 2025

📉

Rate Cut — Section 194-IB

The TDS rate for individual tenants under 194-IB has been reduced from 5% to 2%. This means lower cash blockage for salaried tenants and easier compliance across the board.

Effective 1 Oct 2024

🔍

Stronger Compliance Tracking via AIS

TDS data is now directly linked with AIS and Form 26AS. The IT department is actively monitoring high rent payments and non-deduction cases. Skipping TDS now increases your notice risk significantly.

Active Now

📜

Income-Tax Act 2025 Introduced

The government has introduced the new Income-tax Act 2025 to replace the 1961 Act with simpler language and fewer sections. Core TDS principles for rent remain the same — just easier to read and follow.

New Law

Action Items

Your compliance checklist

Don't just know the rules — follow them. Here's exactly what you need to do.

194-I

For Businesses

Obtain TAN before you make any rent payment. Mandatory — no workaround.

Deduct TDS monthly or at the time of each credit/payment to landlord.

Deposit by 7th of the following month. Late deposit = interest @ 1.5%/month.

File Form 26Q quarterly (TDS return). Applies every quarter regardless of payment month.

Issue Form 16A to your landlord so they can claim TDS credit in their ITR.

194-IB

For Individuals

No TAN required — just use your PAN and landlord's PAN for the transaction.

Deduct 2% once a year — in March, or in the last month of your tenancy if you leave mid-year.

File Form 26QC within 30 days from end of the month in which TDS was deducted.

Issue Form 16C to your landlord within 15 days of filing Form 26QC.

Applies only if monthly rent exceeds ₹50,000. Below that? No TDS obligation under 194-IB.

BOTH

Common to Both Sections

Always give certificate (Form 16A or 16C) to landlord. This is their proof of TDS — they need it.

Verify landlord's PAN — without PAN, TDS is deducted at 20%. Don't skip this step.

Check AIS every quarter — ensure your TDS deposits are reflecting correctly in your AIS and tenant's 26AS.

RISK

What Happens If You Skip It

Interest @ 1%/month from the date TDS was deductible to the date of deduction.

Interest @ 1.5%/month from date of deduction to date of deposit.

₹200/day penalty under Sec 234E for late filing of TDS returns.

Rent expense disallowed — 30% of rent amount may not be allowed as a deduction in your ITR.

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TDS on Rent —Everything You ActuallyNeed to Know.

Two sections.One rule.

Latest News & Updates