TDS on Rent in 2026: Old 194-I vs 194-IB Under the New Act

If you pay rent above Rs 50,000 a month, you probably have to deduct TDS on it, whether you are a company renting an office or a salaried person renting a flat. This guide explains the two regimes that used to be called Section 194-I and Section 194-IB, how they work under the new Income-tax Act, 2025 from 1 April 2026, the rates and thresholds, which form to file and three worked examples you can follow.

Important: these rules come from the Income-tax Act, 2025 and the Income-tax Rules, 2026, which are new. Section numbers, form numbers and portal screens are still settling. Always check the current position on the Income Tax e-filing portal or with a chartered accountant before you deduct or file.

What changed in 2026: old sections, new law

The Income-tax Act, 1961 was replaced by the Income-tax Act, 2025 from 1 April 2026. The new law uses “tax year” instead of the old “previous year / assessment year” pair, and it gathers most TDS provisions into one section, Section 393, set out as tables. Rent is covered in two entries of the Section 393(1) table:

• the entry for rent paid by “specified persons”, which corresponds to the old Section 194-I, and
• the entry for rent paid by individuals and HUFs not covered by that first entry, which corresponds to the old Section 194-IB.

Most rates and thresholds were carried over. Two earlier changes are worth remembering, because many websites still show the older numbers:

• The rate for individual tenants (old 194-IB) was cut from 5% to 2% from 1 October 2024.
• The threshold for business tenants (old 194-I) moved from Rs 2.4 lakh a year to Rs 50,000 per month or part of a month from 1 April 2025.

Rent paid up to 31 March 2026 is dealt with under the old Act and its forms; rent paid from 1 April 2026 falls under the new Act. If a tenancy straddles that date, ask your CA how to split the compliance.

Old 194-I vs old 194-IB at a glance

Point	Business tenants (old 194-I)	Individual/HUF tenants (old 194-IB)
Who deducts	Companies, firms, LLPs, and individuals/HUFs whose accounts are audited	Individuals and HUFs not liable to tax audit
Threshold	Rent above Rs 50,000 for a month or part of a month	Rent above Rs 50,000 for a month or part of a month
Rate: land, building, furniture, fittings	10%	2% (land or building only)
Rate: plant, machinery, equipment	2%	Not covered
When to deduct	At credit or payment, whichever is earlier, each time	Once: at credit or payment of rent for the last month of the tax year, or the last month of the tenancy if earlier
TAN needed?	Yes	No; uses PAN
Deposit and return	Deposit by the 7th of the next month (30 April for March); quarterly TDS return	Challan-cum-statement within 30 days from the end of the month of deduction
No PAN from landlord	20% (or the normal rate if higher)	20%, but not more than the last month’s rent

How the Rs 50,000 threshold works

The threshold is monthly. If rent for any month (or part of a month) exceeds Rs 50,000, TDS applies. A few practical points:

• Joint landlords: where a property is owned jointly and each owner’s share is fixed, tax commentators read the threshold as applying to each owner’s share. Two co-owners each receiving Rs 30,000 of a Rs 60,000 rent may fall below the limit individually. Get this confirmed with your CA for your facts.
• Maintenance charges: if the agreement bundles maintenance into rent, the whole amount may be treated as rent. Separate, genuinely independent maintenance billed by a society is usually not rent, but check the agreement wording.
• GST on rent: under an earlier CBDT circular, where GST is shown separately on the invoice, TDS is computed on the rent excluding GST. Commercial landlords registered under GST will show it separately.
• Advance rent: TDS for business tenants applies at the time of payment, so a security deposit that is refundable is not rent, but non-refundable advance rent is.

Three worked examples

Example 1: a company renting an office

Take an illustrative private limited company in Pune that rents office space for Rs 1,20,000 a month plus GST, and rents furniture from the same landlord for Rs 20,000 a month.

• Office rent: 10% of Rs 1,20,000 = Rs 12,000 TDS each month.
• Furniture rent: Rs 20,000 is below the Rs 50,000 threshold on its own. If the furniture is let under the same agreement as the building, many advisers treat the combined rent as one payment for the threshold test. Combined rent here is Rs 1,40,000, and 10% applies to both, so total TDS is Rs 14,000 a month.
• Deposit by the 7th of the following month using the company’s TAN (TANs are issued through Protean’s TIN facilitation site); report in the quarterly TDS return.
• The landlord sees the credit in their annual tax statement and claims it against their tax.

Example 2: a salaried tenant renting a flat

An illustrative IT professional in Bengaluru rents a 2BHK at Rs 60,000 a month from April 2026 to March 2027. They are an individual not liable to tax audit, so the old 194-IB regime applies.

1. Total rent for the tax year: Rs 60,000 x 12 = Rs 7,20,000.
2. TDS at 2% = Rs 14,400.
3. The tenant deducts the whole Rs 14,400 from the March 2027 rent and pays the landlord Rs 45,600 for March.
4. Within 30 days from the end of March 2027, the tenant files the challan-cum-statement and pays the TDS using their own PAN; no TAN is needed.
5. After processing, the tenant downloads the TDS certificate from the TRACES portal and gives it to the landlord.

If the tenant had vacated in October 2026, the deduction would have been made from the October rent instead, covering April to October.

Example 3: landlord without a PAN

Same flat, but the landlord refuses to share a PAN. TDS rises to 20% of Rs 7,20,000 = Rs 1,44,000. For individual tenants the deduction is capped at the last month’s rent, so the tenant deducts only Rs 60,000 (the full March rent). In practice, most landlords share their PAN once they see the alternative.

Filing for individual tenants: the challan-cum-statement

Under the old law, individual tenants used Form 26QC to pay and report TDS on rent, and then issued Form 16C to the landlord. Under the Income-tax Rules, 2026, tax commentators report that this has been replaced by a schedule in a new consolidated challan-cum-statement form (described as Schedule A of Form No. 141), which also asks for each landlord’s and tenant’s share where there is more than one. Treat the form number as something to confirm on the portal when you file, because some guidance is still being updated.

The steps on the e-filing portal follow the same pattern as before:

1. Log in to the e-filing portal with your PAN.
2. Go to e-File, e-Pay Tax, and choose the TDS on rent (challan-cum-statement) option.
3. Enter tenant and landlord PAN, Aadhaar-linked details, property address, tenancy period, total rent and the amount of TDS.
4. Pay through net banking, UPI or debit card, and download the challan receipt.
5. After a few days, log in to TRACES as a taxpayer and download the TDS certificate for the landlord.

Keep the rent agreement, rent receipts, the challan and the certificate together. If you claim HRA from your employer, this paper trail also helps.

Penalties and interest if you get it wrong

Missing TDS on rent is a common reason salaried tenants get demand notices years later, once the landlord’s high rental income shows up in the department’s data. Under the old law, the consequences were:

Default	Consequence (old Act; similar provisions continue)
Not deducting TDS	Interest at 1% per month or part of a month from the date it was deductible
Deducting but not depositing	Interest at 1.5% per month or part of a month
Late filing of the statement	A fixed late fee per day of delay, limited to the TDS amount
Not deducting at all	Tenant can be treated as an “assessee in default” for the TDS amount

Check the exact amounts under the new Act with a professional, as section references have changed.

Common mistakes to avoid

• Using the old 5% rate for individual tenants. It has been 2% since October 2024.
• Applying the old Rs 2.4 lakh annual limit for business tenants. It is now Rs 50,000 per month.
• Deducting every month as an individual. Individual tenants deduct once, at year-end or tenancy end, not monthly.
• Applying for a TAN as an individual tenant. Not needed; PAN is enough.
• Ignoring NRI landlords. Rent paid to a non-resident follows separate, higher TDS rules with no Rs 50,000 threshold. Get professional advice.
• Not collecting the certificate. Landlords need it to claim credit; without it, disputes follow.

Checklist for tenants and landlords

• Is monthly rent above Rs 50,000? If no, no TDS on rent.
• Is the tenant a business, firm, company or audited individual? Use the business-tenant entry: 10% or 2%, monthly.
• Is the tenant an individual or HUF without tax audit? Use the individual-tenant entry: 2%, once a year.
• Has the landlord given a PAN, and is it valid and operative?
• Is the landlord resident in India?
• Have you diarised the deposit and filing deadline?
• Have you issued the TDS certificate to the landlord?

Frequently Asked Questions

Do I need to deduct TDS if my rent is exactly Rs 50,000 a month?

No. TDS applies only when rent exceeds Rs 50,000 for a month or part of a month. Rent of exactly Rs 50,000 is within the limit.

Can a salaried tenant deduct TDS every month instead of once?

The rule for individual tenants is a single deduction from the last month’s rent of the tax year or tenancy. Deducting monthly creates extra filings and can confuse the landlord’s credit, so stick to the once-a-year method.

Is TDS on rent deducted on the GST amount too?

Where GST is charged separately on the invoice, TDS is calculated on the rent excluding GST, as per an earlier CBDT clarification. Confirm that this approach still applies under the new law with your adviser.

What if the landlord has a nil tax liability?

A resident landlord with no tax liability can give the tenant a self-declaration so that tax is not deducted, subject to the conditions in the Rules. Under the old law this was Form 15G/15H; check the form now prescribed.

Does TDS on rent apply to a shop rented by a small trader?

It depends on the trader. A trader whose accounts are not audited is treated like an individual tenant (2%, once a year). A trader liable to tax audit deducts 10% monthly like a business, with a TAN.

Where can the landlord see the TDS?

The landlord can see it in their annual tax statement on the e-filing portal once the tenant has deposited and reported it, and should match it with the TDS certificate.

Get it right once and it becomes routine

TDS on rent looks complicated only because two regimes share one threshold. Decide which one applies to you, diarise the dates, collect the landlord’s PAN at the start of the tenancy and keep your challans safe. Tax law under the new Act is still being clarified, so check the official portal or a chartered accountant before each filing. If your business is announcing a new office or a move to a bigger space, our guides on writing a press release in India and free press release distribution cover the communication side.