Quick Summary
TDS on rent refers to the deduction of a certain percentage of tax by the tenant before making a rental payment to the landlord. The tenant deducts TDS and deposits it with the government. This ensures that the government receives tax revenue on rental income and prevents tax evasion. Budget 20
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The annual limit for TDS on rent has been increased from ₹2.40 lakh to ₹6 lakh for FY 2025-26. Rent payments up to ₹6 lakh annually will not require TDS deduction.
TDS on rent is governed by three key sections: Section 194I (for businesses and entities subject to tax audit), Section 194IB (for individuals and HUFs not under tax audit), and Section 194IC (for payments under Joint Development Agreements).
For individuals and HUFs not covered under tax audit provisions (Section 194IB), the TDS rate is 5% on the total rent amount, applicable if monthly rent exceeds ₹50,000.
Tenants deduct TDS and deposit it with the government using a challan-cum-statement called Form 26QC, typically once per financial year in the last month of tenancy or financial year.
Individuals with nil tax liability can submit Form 15G or 15H to the deductor to request no TDS deduction. Alternatively, TDS can be claimed as a credit when filing the Income Tax Return.
Penalties and interest are levied for non-deduction or delay. This includes a 1% per month penalty interest on the un-deducted tax amount and a 1.5% per month penalty interest on the un-deposited tax amount. Late fees may also apply for not filing Form 26QC or issuing Form 16C on time.
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