TDS on Rent in 2026: Rates, the Monthly Limit and How Tenants Deduct It

Rent is one of the few TDS obligations that reaches ordinary households as well as businesses. A company leasing a showroom, a trader renting a godown and a salaried employee paying for a flat in Bengaluru can all be required to withhold tax from the landlord's rent. This guide is for tenants, landlords and the accountants who handle their books. It sets out the rates for buildings and for machinery, the monthly limit, the once-a-year rule for individual tenants, the forms that replaced Form 26QC from 1 April 2026, what happens when the landlord has no PAN, and how a landlord can get the deduction reduced — with worked examples in rupees.

Quick answer

TDS on rent applies when rent for a month exceeds ₹50,000 a month. Businesses that are specified persons (companies, firms, LLPs and individuals/HUFs above the ₹1 crore business or ₹50 lakh professional turnover mark) deduct 10% on land and buildings and 2% on machinery every time rent is credited or paid. Other individuals and HUFs deduct 2% once a year, using their PAN and Form 141.

• Land, building, furniture or fittings: 10% (old section 194-I, now section 393(1) Table Sl. No. 2(ii))

• Machinery, plant or equipment: 2%

• Individual or HUF tenant not a specified person: 2% on land/buildings only (old 194-IB, now Sl. No. 2(i))

• Landlord without PAN: 20% — capped at one month's rent for individual tenants

• GST shown separately on the invoice is left out of the TDS base

What counts as rent for TDS

The Income-tax Act, 2025 defines rent widely. It is any payment, whatever it is called, under a lease, sub-lease, tenancy or any other agreement or arrangement for the use of land, a building (including a factory building), land appurtenant to a building, machinery, plant, equipment, furniture or fittings. It does not matter whether the person receiving the money owns the asset. A tenant who sub-lets a floor and collects rent from the sub-tenant is a landlord for TDS purposes, and so is a company that licenses out spare warehouse space.

The definition is about the substance of the arrangement rather than its label. Agreements described as "leave and licence", "use of premises", "facility charges" or "hiring charges" are rent if what you are paying for is the use of the property or equipment. Maintenance charges billed by the landlord as part of the same arrangement are usually treated as part of the rent; maintenance paid separately to a housing society or facility manager under its own contract is a different payment and may fall under contractor TDS instead. Read the agreement and the invoice before deciding which provision applies.

A refundable security deposit that genuinely comes back to you at the end of the lease is not rent, because you are not paying for the use of anything — the landlord is holding your money. If the deposit is non-refundable, or is adjusted against rent month by month, it starts to look like rent paid in advance and the TDS rules apply to it. Advance rent is still rent: if you prepay a year's rent of a building that costs more than the monthly limit, the deduction is triggered at the time of the credit or payment, whichever is earlier.

There is one narrower reading for individual tenants. For the 2% rule that applies to individuals and HUFs who are not specified persons, only payments for land, buildings and land appurtenant to a building count as rent. If a salaried person hires a generator for a family function or rents furniture, there is no TDS on that payment at all, however large it is.

TDS on rent at a glance (tax year 2026-27)

₹50,000 a month

Rent limit

per month or part of a month

10%

Building rent

specified persons

2%

Machinery rent

specified persons

2%

Individual tenants

once a year, Form 141

Who deducts: specified persons and other tenants

Since 1 April 2026 the rent rules sit in section 393(1) of the Income-tax Act, 2025, in two rows of the TDS table. Which row applies depends on whether the tenant is a "specified person".

A specified person is any person other than an individual or HUF — a company, a partnership firm, an LLP, a trust, a society, a co-operative, a government body — plus an individual or HUF whose total sales, gross receipts or turnover from business exceeded ₹1 crore, or from a profession exceeded ₹50 lakh, in the tax year immediately before the year in which the rent is paid. Specified persons deduct under Table Sl. No. 2(ii), which replaced section 194-I of the 1961 Act.

Every other individual or HUF — salaried tenants, pensioners, small traders and professionals below those turnover lines — deducts under Table Sl. No. 2(i), which replaced section 194-IB. The old rule was often described as "individuals and HUFs not liable to tax audit", and in most cases that is how it works out, but the legal test is the previous year's turnover figure, not whether an audit actually happened. A proprietor whose business turnover crossed ₹1 crore last year is a specified person this year even if they were not audited because of the higher digital-transaction audit limit.

Rates and the monthly threshold

The rates have not changed in the move to the new Act. The Income Tax Department's e-filing help confirms that rates and monetary thresholds were carried over unchanged into section 393; what changed is the section you quote, the payment code and the form number.

The threshold is the part people get wrong most often. Until 31 March 2025, section 194-I used an annual limit of ₹2,40,000. The Finance Act 2025 replaced it with a monthly test from 1 April 2025: rent of more than ₹50,000 a month for a month or part of a month. The individual-tenant rule already used the same monthly figure. That limit is now common to both rows.

The practical effect is that a business paying ₹45,000 a month for a shop — ₹5.4 lakh a year — no longer deducts any TDS on that rent, even though it would have under the old annual test. A business paying ₹52,000 a month deducts on the whole ₹52,000 every month, not just on the excess over the limit, because once the limit is crossed TDS applies to the entire amount. "Part of a month" matters for short stays and broken periods: rent of ₹60,000 for a 20-day period in the first month of a lease crosses the limit for that part-month.

Where one property has several co-owners who each receive their own share of the rent, Form 141 asks the tenant to report each landlord's share percentage, and in practice each co-owner's share is tested separately. Where several tenants share a flat and each pays their own portion, each tenant is a separate deductor for their share. If your case is close to the limit on this point, confirm the treatment with a tax professional before deciding not to deduct.

How businesses deduct TDS on rent (Sl. No. 2(ii))

A specified person deducts at the time the rent is credited to the landlord's account in the books or at the time it is paid, whichever is earlier. If your accounts team books the October rent on 31 October and pays on 5 November, the deduction belongs to October. The tax must be deposited by the 7th of the next month under the TAN of the business, using the payment code for building or machinery rent; tax deducted in March is due by 30 April.

The business then reports the deduction in its quarterly statement for payments to residents — Form 140, which replaced Form 26Q from 1 April 2026 — and issues the landlord a quarterly TDS certificate in Form 131 (formerly Form 16A), downloaded from TRACES. The quarterly statement dates for tax year 2026-27 are 31 July, 31 October, 31 January and 31 May. Our guide to TDS covers the full deposit-and-return cycle and the new form numbers.

GST needs care on commercial leases, because most commercial rent carries GST at 18%. CBDT Circular 23/2017 says that where the agreement or invoice shows the GST on services separately, TDS is deducted on the amount excluding that GST. The circular was issued under the 1961 Act; the Department has not published a replacement for the new Act, and it continues to be followed in practice. Ask your landlord for an invoice that shows rent and GST on separate lines. Our GST on rent guide explains when commercial and residential rent attract GST and when reverse charge applies.

Two exclusions are worth knowing. Rent paid to a real estate investment trust for real estate assets that the business trust owns directly is outside TDS under section 393(4). And payments to the Government, the Reserve Bank and certain statutory corporations exempt from tax are never subject to TDS under section 393(5).

Business tenant vs individual tenant

Point	Specified person (Sl. 2(ii))	Other individual/HUF (Sl. 2(i))
Old section	194-I	194-IB
Assets covered	Land, building, furniture, fittings, machinery, plant, equipment	Land, building and appurtenant land only
Rate	10% building / 2% machinery	2%
When deducted	Every month, at credit or payment (earlier)	Once — last month of the tax year or tenancy
Number used	TAN	PAN (no TAN needed)
Deposit and report	Challan by the 7th; quarterly Form 140	Form 141 within 30 days of month-end
Certificate to landlord	Form 131 (was 16A), quarterly	From TRACES after Form 141 (was Form 16C)

Old section

Specified person (Sl. 2(ii))

194-I

Other individual/HUF (Sl. 2(i))

194-IB

Assets covered

Specified person (Sl. 2(ii))

Land, building, furniture, fittings, machinery, plant, equipment

Other individual/HUF (Sl. 2(i))

Land, building and appurtenant land only

Rate

Specified person (Sl. 2(ii))

10% building / 2% machinery

Other individual/HUF (Sl. 2(i))

2%

When deducted

Specified person (Sl. 2(ii))

Every month, at credit or payment (earlier)

Other individual/HUF (Sl. 2(i))

Once — last month of the tax year or tenancy

Number used

Specified person (Sl. 2(ii))

TAN

Other individual/HUF (Sl. 2(i))

PAN (no TAN needed)

Deposit and report

Specified person (Sl. 2(ii))

Challan by the 7th; quarterly Form 140

Other individual/HUF (Sl. 2(i))

Form 141 within 30 days of month-end

Certificate to landlord

Specified person (Sl. 2(ii))

Form 131 (was 16A), quarterly

Other individual/HUF (Sl. 2(i))

From TRACES after Form 141 (was Form 16C)

How individual tenants deduct TDS on rent (Sl. No. 2(i))

The individual-tenant rule is built to be simple for people who do not run a payroll or accounts team. Instead of deducting every month, the tenant deducts once: at the time of credit or payment of the rent for the last month of the tax year (March) or the last month of the tenancy if the tenancy ends earlier, whichever applies. The deduction is 2% of the rent for the whole period of the tax year in which the monthly rent was above the limit.

Section 397(1)(c) of the new Act exempts these tenants from getting a TAN. They pay and report the tax through Form 141, the challan-cum-statement that replaced Forms 26QB, 26QC, 26QD and 26QE from 1 April 2026. On the e-filing portal the path is e-File → e-Pay Tax → Income Tax Act 2025 → New Payment → Form 141, and rent is Schedule A. Only individual and HUF deductors can use Schedule A. The Department's FAQs say the tax must be paid within 30 days from the end of the month in which it is deducted, together with Form 141, so a deduction made from the March 2027 rent is due by 30 April 2027.

Each Form 141 covers one type of transaction and one month of deduction. Two tenants who share a flat each file their own form for their share; one tenant paying two landlords can cover both in one form only if both landlords fall in the same category (both non-corporate, for example) and the tax was deducted in the same month. After filing you get an SMS and email confirmation, and the landlord's certificate is generated on TRACES — download it from there and hand it over. Corrections are made on TRACES, where you register as a taxpayer, not on the e-filing portal.

Salaried tenants claiming house rent allowance should line this up with their HRA claim. If your rent is above ₹1 lakh a year a year, your employer will ask for the landlord's PAN anyway. Our HRA calculation guide shows how the exemption is worked out under both tax regimes.

Which rent TDS rule applies to you?

Step 1

Is rent above ₹50,000 for any month?

Step 2

Tenant a company, firm, LLP or large proprietor? → Sl. 2(ii): monthly, TAN

Step 3

Other individual/HUF? → Sl. 2(i): once a year, PAN

Step 4

Landlord PAN given?

if not, 20%

Step 5

Deposit, report, issue certificate

Worked examples in ₹

1. Private limited company renting an office. Rent is ₹80,000 a month plus GST at 18% (₹14,400), shown separately on the landlord's invoice. The company is a specified person and the rent is above ₹50,000 a month, so it deducts 10% on ₹80,000: ₹8,000 a month. It pays the landlord ₹86,400 (₹80,000 + ₹14,400 − ₹8,000) and deposits ₹8,000 by the 7th of the next month. Over the year the landlord sees ₹96,000 of TDS in their credit statement.

2. The same company hires a generator. A DG set is hired at ₹60,000 a month under a separate rental agreement. This is machinery, so the rate is 2%: ₹1,200 a month. If the hire agreement also includes an operator and diesel supplied by the vendor, look at the contract carefully — a service contract with equipment may fall under contractor TDS instead; see our TDS on contractor payments guide.

3. Salaried tenant, full year. Priya pays ₹55,000 a month for a flat from April 2026 to March 2027 — ₹6,60,000 for the year. She is not a specified person, so she deducts 2% once: 2% × ₹6,60,000 = ₹13,200, taken from the March 2027 rent. She pays the landlord ₹41,800 for March and deposits ₹13,200 with Form 141 by 30 April 2027.

4. Tenancy that ends mid-year. Rahul rents at ₹62,000 a month from April and vacates at the end of November 2026, eight months later. His last month of tenancy is November, so he deducts 2% × ₹4,96,000 = ₹9,920 from the November rent and files Form 141 by 30 December 2026.

5. Landlord with no PAN. In Priya's case, if the landlord refuses to give a PAN, the rate becomes 20%: 20% × ₹6,60,000 = ₹1,32,000. The law caps the deduction for an individual tenant at the rent for the last month — ₹55,000 — so she deducts ₹55,000 and pays nothing for March. A business tenant gets no such cap: at ₹80,000 a month without a PAN, the company in example 1 would deduct ₹16,000 every month.

6. Rent just below the limit. A trader who is not a specified person pays ₹48,000 a month for a godown. Rent never exceeds ₹50,000 a month in any month, so no TDS applies, even though the annual total is ₹5.76 lakh. If the rent is raised to ₹51,000 from January, the months from January onwards cross the limit, and the March deduction is worked out on the rent for those months.

Try it — TDS on office rent

Payment AmountNature of Payment (Section)

194C — Contractor (Individual/HUF) · 1%194C — Contractor (Others) · 2%194J — Professional fees · 10%194J — Technical services · 2%194H — Commission / brokerage · 2%194I — Rent (Land & building) · 10%194I — Rent (Plant & machinery) · 2%194Q — Purchase of goods · 0.1%194A — Interest (other than securities) · 10%

Payee PAN

PAN availableNo PAN (20%)

Payment Amount₹80,000.00

Section194I

TDS Rate10%

TDS to Deduct₹8,000.00

Net Payable to Payee₹72,000.00

Open the full TDS Calculator (PDF, save, compare)

When the landlord has no PAN, or wants less deducted

Section 397(2) of the Income-tax Act, 2025 (old section 206AA) requires every payee to give a valid PAN to the person deducting tax. If the landlord does not, tax is deducted at the higher of the normal rate, the rates in force or 20%. For individual tenants under the 2% rule, the same section caps the deduction at the last month's rent, which is why the no-PAN deduction in example 5 stops at ₹55,000. Since 1 April 2025 there is no longer a separate higher rate for landlords who have simply not filed returns.

A landlord whose actual tax liability is lower than the TDS would suggest — because of losses, deductions, a low total income or rent that is mostly offset by interest on a home loan — can apply for a lower or nil deduction certificate under section 395(1). The application form is Form 128, which replaced Form 13 from 1 April 2026, and it is filed online on TRACES. The Assessing Officer examines the estimated income and, if satisfied, issues a certificate naming the rate, the period, the deductor and the maximum amount it covers. The tenant must deduct at the certificate rate until it expires or the amount is used up. There is no fixed processing period, so landlords should apply well before the first rent payment of the year; a certificate issued under the old section 197 for tax year 2026-27 receivables remains valid.

The Finance Act 2026 enabled a simpler, rule-based electronic route for small taxpayers to obtain these certificates, using data already held by the Department such as earlier returns and the Annual Information Statement. In a Lok Sabha reply on 10 August 2026 the government said the enabling rule was still being prepared; until it is notified, Form 128 is the route.

There is also a self-declaration option for some landlords. Under section 393(6), a resident individual landlord whose estimated tax for the year is nil can give a business tenant a declaration in Form 121 (which replaced Forms 15G and 15H) asking it not to deduct. This option applies to rent under Sl. No. 2(ii) — business tenants — and is generally unavailable when the landlord's total rent for the year exceeds the basic exemption limit, unless the landlord is 60 or older.

Filing Form 141 for rent as an individual tenant

1. 1

   Work out the amount

   Add up the rent for every month of the tax year (or tenancy) and apply 2%. Use 20% if there is no PAN, capped at the last month's rent.

2. 2

   Deduct from the last month's rent

   Pay the landlord the March rent (or the final month's rent) minus the TDS.

3. 3

   Log in with your PAN

   On the e-filing portal go to e-File → e-Pay Tax → Income Tax Act 2025 → New Payment → Form 141, and choose Schedule A (rent).

   Form 141 help page
4. 4

   Enter landlord and property details

   Landlord PAN, address of the property, period of tenancy, total rent, share percentages if there are co-owners, and the date and amount deducted.

5. 5

   Pay and file within 30 days of month-end

   Pay through net banking or another e-Pay Tax mode; the payment and statement go together.

   Tip: A deduction made in March is due by 30 April.

6. 6

   Give the landlord the certificate

   Register on TRACES as a taxpayer, download the TDS certificate and send it to the landlord.

Deadlines, interest and penalties

Missing the rent TDS is costly, because the charges stack on top of each other. Interest runs at 1% a month or part of a month if you fail to deduct, from the date tax should have been deducted to the date it actually is, and at 1.5% a month or part of a month if you deduct but deposit late. A late fee of ₹200 a day applies for every day the statement — Form 140 for businesses or Form 141 for individuals — is late, capped at the TDS amount. Penalties are also possible if the statement is not filed at all or contains incorrect details.

For businesses there is a further sting: if TDS on rent paid to a resident is not deducted, or is deducted but not deposited by the return due date, 30% of that rent expense is disallowed when computing taxable profit (section 35(b) of the new Act, which corresponds to section 40(a)(ia)). On annual rent of ₹9.6 lakh, that is ₹2.88 lakh added back to profit. The expense becomes allowable in the year the TDS is finally paid.

Rent TDS calendar for tax year 2026-27

7th of every month

Business tenants deposit TDS on the previous month's rent

31 July 2026

Q1 Form 140 statement (business tenants)

31 October 2026

Q2 Form 140 statement

31 January 2027

Q3 Form 140 statement

March 2027

Individual tenants deduct 2% from the March rent

30 April 2027

Business deposit for March; individual tenants' Form 141 for March deductions

31 May 2027

Q4 Form 140 statement

Common mistakes and how to fix them

Using the old annual limit. Some accounting setups still test rent against ₹2,40,000 a year. That limit ended on 31 March 2025; the test is now monthly. Update the vendor master so TDS triggers only where a month's rent exceeds ₹50,000 a month.

Deducting on GST. If the invoice shows GST separately, leave it out of the TDS base. If you have already deducted on the GST, adjust it against later rent to the same landlord within the year and keep a note of the working.

Choosing the wrong form. Individual tenants who are not specified persons must not use a TAN-based quarterly statement for rent, and businesses must not use Form 141. A proprietor who becomes a specified person because last year's turnover crossed ₹1 crore has to switch from the once-a-year Form 141 to monthly deductions under the business's TAN from the start of the new tax year.

Using the old Act's forms for new periods. For rent credited or paid on or after 1 April 2026, use Form 141, Form 140 and the new payment codes. Form 26QC and Form 26Q apply only to deductions where the earlier of credit or payment happened on or before 31 March 2026.

Wrong PAN or wrong year. A mistyped landlord PAN means the credit does not reach the landlord, who will then chase you. Fix it with a correction on TRACES rather than paying again. Landlords should check their Annual Information Statement before filing their own return and raise any mismatch with the tenant early.

Treating a deposit as rent, or rent as a deposit. If a "deposit" is being adjusted against monthly rent, it is rent and TDS applies when it is credited or paid. Keep the lease clear about which amounts are refundable.

What changed under the Income-tax Act, 2025

The rent provisions moved from sections 194-I and 194-IB of the 1961 Act into a single table in section 393(1) of the Income-tax Act, 2025, which came into force on 1 April 2026. The rates, the ₹50,000 a month limit and the once-a-year rule for individual tenants were carried over unchanged. The transition rule is simple: if the earlier of the credit or the payment happened on or before 31 March 2026, the old Act applies; if it happened on or after 1 April 2026, the new Act applies. An individual tenant whose tenancy continued from 2025-26 into 2026-27 therefore deducted under section 194-IB for 2025-26 (in March 2026, reported in Form 26QC) and deducts under section 393 for 2026-27.

The form numbers changed with the Income-tax Rules, 2026: Form 141 for individual tenants, Form 140 and Form 131 for businesses, Form 128 for lower deduction certificates and Form 121 for nil-tax declarations. Older circulars, such as the 2017 circular on GST, have not been formally reissued for the new Act at the time of writing; they continue to be applied, but watch for fresh CBDT guidance.

Official links

• Income-tax Act, 2025 — Gazette textSection 393(1) Table Sl. 2(i) and 2(ii); s.395; s.397
• Form 141 — help and stepsRent TDS for individual and HUF tenants (Schedule A)
• Form 141 — FAQsDue dates, multiple landlords, corrections
• TDS compliance helpTransition rule, interest, disallowance
• TRACESCertificates, Form 128 applications, corrections
• e-Filing portalPay TDS and file Form 141 with PAN login

What to do next

Before the next rent cheque, check three things: whether you are a specified person this year, whether the month's rent crosses ₹50,000 a month, and whether the landlord's PAN and invoice are in order. Then run the figure through our free TDS calculator. If you also pay contractors or consultants, read our guides to TDS on contractor payments and TDS on professional fees; landlords receiving rent from a business should keep an eye on their own advance tax after credit for the TDS.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the TDS limit on rent in 2026?

TDS on rent applies only when rent exceeds ₹50,000 a month — the test is for each month or part of a month, not the year. This single limit applies both to businesses deducting under the old section 194-I and to individual or HUF tenants under the old section 194-IB. Since 1 April 2026 both sit in section 393(1) of the Income-tax Act, 2025, with the limit unchanged.

What is the TDS rate on rent of plant and machinery?

A business that is a specified person deducts 2% on rent for machinery, plant or equipment, and 10% on rent for land, buildings, furniture or fittings. The machinery rate covers hired generators, cranes, moulds and similar equipment. Individual tenants who are not specified persons have no TDS duty on machinery rent at all — their 2% rule covers only land and buildings.

Does a salaried person have to deduct TDS on house rent?

Yes, if the rent for any month exceeds ₹50,000 a month. A salaried tenant deducts 2% once a year, from the rent for March or the last month of the tenancy, and pays it with Form 141 using their PAN — no TAN is needed. The deduction is reported within 30 days from the end of the month in which it is made.

Is TDS on rent deducted on the GST amount?

No, if the GST is shown separately in the invoice or agreement. CBDT Circular 23/2017 says TDS is worked out on the amount excluding the GST component when that component is indicated separately. If the bill shows one lump sum including GST, the deductor has to apply TDS on the whole figure, so ask the landlord for a properly split invoice.

What if my landlord does not have a PAN?

Tax must then be deducted at 20% instead of the normal rate, under section 397(2) of the Income-tax Act, 2025 (old section 206AA). For an individual tenant deducting under the 2% rule, the law caps that higher deduction at the rent for the last month of the tax year or tenancy, so you never withhold more than one month's rent.

Can the landlord get TDS on rent reduced?

Yes. A landlord whose income justifies a lower rate can apply on TRACES in Form 128 (formerly Form 13) for a lower or nil deduction certificate under section 395(1). Once the tenant holds the certificate, they deduct at the rate it states, for the period and amount it covers. Resident individual landlords with nil estimated tax can also give a business tenant a Form 121 declaration.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.The Income-tax Act, 2025 (Act No. 30 of 2025), Gazette of India Extraordinary, 21 August 2025 — Ministry of Law and Justice (Legislative Department) · accessed 9 October 2026
2. 2.TDS Compliance — e-Filing help — Income Tax Department (e-Filing portal) · accessed 9 October 2026
3. 3.Form 141 — challan-cum-statement for deduction of tax under section 393(1) — Income Tax Department (e-Filing portal) · accessed 9 October 2026
4. 4.Form 141 — FAQs — Income Tax Department (e-Filing portal) · accessed 9 October 2026
5. 5.TDS / TCS Rate Chart Tax Year (FY 2026-27) — TDSMAN · accessed 9 October 2026
6. 6.TDS on Rent w.e.f. 01.04.2026 as per New Income Tax Rules 2026 — TaxHeal · accessed 9 October 2026
7. 7.Form 13 is now Form 128: lower or nil TDS certificate guide — Busy Infotech · accessed 9 October 2026
8. 8.CBDT Circular No. 23/2017 — TDS on GST component — TaxGuru (reproducing CBDT circular dated 19 July 2017) · accessed 9 October 2026