Overview
For Financial Year 2026-27 (Assessment Year 2027–28), the TDS provisions on rent are governed by the newly structured Income Tax Act, 2025, specifically under Section 393, which consolidates the earlier section-based framework.
Although the administrative section numbers have been converted into a simplified tabular format for filing returns, the substantive tax rates and exemption limits remain unchanged from the previous framework, in line with key updates introduced in recent Union Budgets.
Below is the complete breakdown of TDS on rent covering the applicable sections, thresholds, and rates for FY 2026–27.
Also Read: How to Deposit TDS under the Income Tax Act 2025?
Section 194-I (Now reported under Section 393 Table Codes)
This section applies to corporate entities, firms, trusts, AOPs, as well as individuals and HUFs that were subject to a tax audit under Section 44AB in the previous financial year.
Exemption Threshold:
₹50,000 per month (effectively ₹6,00,000 per annum). TDS is required only if the total rent paid or payable to a single landlord exceeds this limit during the financial year.
Applicable Rates:
- 2% for renting of plant, machinery, or equipment
- 10% for renting of land, building (residential or commercial), furniture, or fittings
Deduction Timeline:
At the time of crediting rent to the payee’s account, or at the time of payment (cash, cheque, draft), whichever is earlier.
Return Reporting Codes (New Act):
- Code 1008 - for plant and machinery
- Code 1009 - for land, building, or furniture
Section 194-IB (Now reported under Section 393 Table Codes)
This applies to individuals and HUFs who are not covered under the tax audit provisions of Section 44AB. It is typically used by salaried individuals or small business owners renting residential properties.
Exemption Threshold:
₹50,000 per month (or part of a month).
Applicable Rate:
2% on the total rent paid during the financial year.
Note: This rate was permanently reduced from 5% to 2% to simplify compliance.
Deduction Timeline:
Deducted once a year — specifically at the time of crediting or paying rent for the last month of the financial year (March), or the last month of the tenancy if the property is vacated mid-year.
Compliance Benefit:
The tenant does not need a TAN (Tax Deduction and Collection Account Number) to deposit this tax. It can be paid using the PAN-based Form 26QC.
Section 195 (Rent Paid to Non-Resident Indians)
If the landlord is an NRI, neither Section 194-I nor Section 194-IB applies. Tax must be deducted under Section 195.
Exemption Threshold:
No threshold limit. TDS must be deducted even on a single rupee of rent paid.
Applicable Rate:
30% (plus applicable surcharge and health and education cess). A lower rate may apply if the landlord has obtained a Lower Deduction Certificate from the Income Tax department or qualifies for benefits under a DTAA.
Also Read: Form 27Q New Section as per IT Rules, 2026
Table: Old vs New Section
| New Section Reference | Old Section (1961 Act) | TRACES Return Payment Code | Payer Type (Deductor) | Payee Type (Deductee) | Type of Asset / Rent | Exemption Threshold Limit | TDS Rate (Valid PAN) | TDS Rate (No PAN) | Quarterly Return Form |
| Sec 393(1) [Sl. No. 2(ii).D(a)] | Sec 194I(a) | 1008 | Specified Person / Corporate / Audited Indiv. & HUF | Resident | Plant, Machinery, or Equipment | >₹50,000 per month (or part of a month) | 2% | 20% | Form 26Q |
| Sec 393(1) [Sl. No. 2(ii).D(b)] | Sec 194I(b) | 1009 | Specified Person / Corporate / Audited Indiv. & HUF | Resident | Land, Building, Furniture, or Fittings | >₹50,000 per month (or part of a month) | 10% | 20% | Form 26Q |
| Sec 393(1) [Sl. No. 2(i)] | Sec 194IB | 1028 (Challan Code: 26QC) | Non-Audited Individuals & HUF | Resident | Any Land or Building | >₹50,000 per month (or part of a month) | 2% | 20% (Max capped at last month's rent) | Form 26QC (Challan cum Return) |
| Sec 393(2) [Table Entry Codes] | Sec 195 | 1053 | Any Tenant | Non-Resident Indian (NRI) | Any Rentable Asset | Nil (Deductible on first rupee) | 30%(+ applicable surcharge & cess) | 30% (+ surcharge & cess) | Form 27Q |
Also Read: Section 393 TDS framework
Conclusion
TDS on rent is compulsory when rent crosses the threshold limit. Businesses and tax-audit cases must deduct TDS u/s 194I, while individuals/HUF paying monthly rent above ₹50,000 must deduct TDS under Section 194IB. Proper deduction, timely payment and filing of forms help to avoid interest, penalties and notices from the Income Tax Department.
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