TDS on Rent After the Rs 50,000-a-Month Rule: 7 Worked Cases for 2026

Since 1 April 2025 the test for TDS on rent has been the rent for a month or part of a month, not the year's total. The old Rs 2.4 lakh annual limit is gone. From 1 April 2026 the provisions we still call sections 194-I and 194-IB sit in the TDS table in section 393 of the Income-tax Act, 2025.

The rates did not change: 10% for land, buildings, furniture and fittings; 2% for plant, machinery and equipment; and 2% once a year for individuals and HUFs not under audit. What changed is when tax has to be deducted, and that is where client books go wrong. Carried-forward ledgers still apply the yearly test. Some deduct where nothing is due; others miss a new lease that crosses Rs 50,000 a month.

The seven cases below are the ones that come up most in practice. Figures are in rupees. "Business payer" means a company, firm, LLP, or an individual or HUF whose accounts were audited in the previous year.

The rule in one table

Case 1: Office at Rs 48,000 a month (company)

Annual rent is Rs 5,76,000. Under the old yearly test this was well above Rs 2.4 lakh, and the company deducted 10% every month.

Now: each month's rent is below Rs 50,000. No TDS.

This is the commonest error in books carried over from FY 2024-25. If the client keeps deducting, the landlord gets less cash than the agreement says, and the TDS is "excess" rather than a credit anyone asked for. Stop the deduction from the first month it is not required, and tell the landlord in writing.

Case 2: Printing machine on hire at Rs 70,000 a month (firm)

Machinery, so 2%. Rent exceeds Rs 50,000, so TDS is Rs 1,400 a month.

The point to check is the agreement, not the ledger name. A combined "rent" for premises and the equipment in it should be split if the agreement allows it. Otherwise, firms end up deducting 10% on equipment or 2% on premises. When the agreement does not separate them, take a view, record it on the file, and apply it the same way every month.

Case 3: A lease that starts mid-month

The lease starts on 20 January at Rs 90,000 a month. The rent for 20–31 January is Rs 90,000 × 12 ÷ 31 = Rs 34,839 .

The section speaks of rent "for a month or part of a month" exceeding Rs 50,000. On its plain words, January's part-month rent of Rs 34,839 does not cross the limit, so no TDS for January . From February onwards it is Rs 9,000 a month (10%).

The reverse also holds. A short-term let of Rs 60,000 for two weeks crosses the limit even though it is for less than a month. Document the computation on the file. This is a literal reading, and a cautious deductor may still choose to deduct on the January amount.

Case 4: Rent with GST shown separately

Office rent is Rs 1,00,000 a month, and the landlord's invoice shows GST separately.

Deduct on the rent excluding GST : Rs 10,000. CBDT Circular 23/2017, issued under the 1961 Act, says that where the GST component is shown separately in the agreement or invoice, TDS on rent applies to the amount without GST. If the landlord bills a single consolidated figure, the whole amount is the base. That is one more reason to ask for a proper tax invoice.

Case 5: Salaried tenant, tenancy ends mid-year

A salaried individual (no audit) pays Rs 55,000 a month and vacates at the end of October, after seven months.

The once-a-year deduction falls on the last month of the tenancy, not March: 2% × (Rs 55,000 × 7) = Rs 7,700, deducted from the October rent. The landlord receives Rs 47,300 for October.

The tenant needs no TAN and deposits the tax using their PAN, through a challan-cum-statement. Under the 1961 Rules that was Form 26QC; under the 2026 Rules it has been reported as folded into Form 141, so confirm the current form on the e-filing portal before depositing. The landlord gets the TDS certificate from the tenant. Clients forget this case most often, because nothing happens in March.

Case 6: Same tenant, landlord has no PAN

The tenant pays Rs 52,000 a month for twelve months, and the landlord will not give a PAN.

At 20%, the deduction would be 20% × Rs 6,24,000 = Rs 1,24,800, more than the March rent itself. Under the 1961 Act, section 194-IB(4) capped the deduction at the rent for the last month. So the deduction is Rs 52,000: the whole March rent, and the landlord receives nothing for March. For payments from April 2026, check that the same cap appears in the section 393 table before relying on it.

Clients usually get the PAN within a week once they see this computation. Do it in January, not March.

Case 7: March 2026 rent paid in April 2026, across the change of Act

A company credits March 2026 office rent of Rs 75,000 to the landlord's account on 31 March 2026, and pays it on 4 April 2026.

TDS is due at the earlier of credit or payment, so the deduction of Rs 7,500 happened on 31 March 2026, under the 1961 Act. It is deposited by 30 April 2026 and reported in the Q4 FY 2025-26 return as a section 194-I payment. The April 2026 rent, credited in April, falls under section 393 and the new forms.

Two follow-ons for the year-end file:

• A year-end provision for rent, credited to a provision or suspense account, is a "credit" for TDS. Deduct on it. Don't wait for the bill.
• Working papers for April 2026 onwards should quote the new Act. Mixing old section numbers into the new year's papers is how a reviewer starts asking questions.

Points that need judgment, not arithmetic

• Co-owners. A property owned by two people at Rs 80,000 a month is Rs 40,000 each. A view taken in several Tribunal decisions applies the threshold to each co-owner's share where the shares are defined and rent is paid to each separately. Record the shares in the agreement and pay each co-owner into their own account. A single payment to one co-owner weakens the position.
• Security deposit. A refundable deposit is not rent and is not subject to TDS. A non-refundable deposit, or one adjusted against rent, is rent for the period it is adjusted against.
• Maintenance charges. If they are paid to the landlord under the same agreement as part of the consideration for use, they are usually treated as rent. If they are paid to a society or agency for services, they are not rent, though other TDS provisions may apply.
• Advance rent. Deduct when it is paid. Don't spread it over the months it covers.

Due dates and the cost of getting it wrong

• Business payers deposit by the 7th of the following month, and by 30 April for March deductions. Each quarter they file the non-salary TDS return and give the landlord a certificate.
• Individuals under the once-a-year rule deposit within 30 days from the end of the month of deduction.
• Under the 1961 Act, interest ran at 1% a month for not deducting and 1.5% a month for deducting but not depositing, plus a daily fee for late returns; check the corresponding provisions of the new Act for 2026-27. Rent is a fixed, recurring payment, so a missed deduction repeats every month until someone notices.

A five-minute check for every client in November

1. List every rent payee and the monthly rent for each.
2. Mark which ones are above Rs 50,000 for any month or part month.
3. Check that each payee has the right rate: premises 10%, equipment 2%.
4. Check whether any individual client is a tenant at more than Rs 50,000 a month, with a lease ending before March.
5. Confirm a PAN is on file for every landlord.

Most problems in rent TDS come from leases signed mid-year and ledgers set up before April 2025. This check catches both before the Q3 return.

Sources: Income-tax Act, 1961, sections 194-I, 194-IB and 206AA; Finance Act, 2025 (Rs 50,000-a-month threshold from 1 April 2025); Income-tax Act, 2025, section 393; CBDT Circular No. 23/2017 (TDS on rent excluding GST).

The author is Jitendra, founder of Grovia (groviaos.com), practice and business management software for Indian CA firms and service businesses. Views are personal; readers should check the provisions against the Income-tax Act, 2025 and the Rules for their own facts.