TDS on Rent Under the New Income Tax Act, 2025

TDS on Rent Under the New Income Tax Act, 2025

Rent is one of the most common payments on which TDS applies — and one that trips up first-time compliance owners most often, because the rules differ depending on who is paying and how much. From 1st April 2026, the two erstwhile provisions governing rent — Section 194-I (businesses/professionals) and Section 194-IB (individuals/HUFs) — have both been folded into Section 393(1) of the Income Tax Act, 2025, under Table 1. This guide breaks down who deducts, how much, and how to comply.

Which Provision Applies to You

The old distinction between a ₹2.4 lakh annual threshold (194-I) and a ₹50,000 monthly threshold (194-IB) has been retired — both provisions now use the same ₹50,000-per-month trigger, unified under Section 393.

TDS Rates on Rent

TDS applies only on the rent amount excluding GST, provided GST is separately mentioned in the invoice or rental agreement. A genuine refundable security deposit is not “rent” and is not subject to TDS.

Compliance Process — Businesses (Table 1, Sl. No. 2(ii))

1.          Deduct TDS each month (or at the time of credit/payment, whichever is earlier) once the ₹50,000/month threshold is crossed.

2.          Deposit the deducted amount by the 7th of the following month (30th April for March deductions).

3.          File the quarterly non-salary TDS return — Form 140 (successor to Form 26Q).

4.          Issue Form 131 (successor to Form 16A) to the landlord within 15 days of filing the return.

Compliance Process — Individuals/HUFs Not Liable to Audit (Table 1, Sl. No. 2(i))

This is the compliance route most relevant to salaried tenants renting a house or flat, and it works differently:

•             No TAN required. The tenant uses their own PAN to deduct and deposit tax — a major simplification retained from the old Section 194-IB regime.

•             TDS is deducted once a year — at the time of credit/payment of rent for the last month of the tax year, or the last month of tenancy if the property is vacated earlier, whichever comes first — on the cumulative rent paid for the whole period.

•             File Form 141 (the new consolidated challan-cum-statement, successor to Form 26QB/26QC/26QD/26QE) within 30 days from the end of the month in which TDS was deducted.

•             Issue the corresponding TDS certificate to the landlord within 15 days of the due date for furnishing the statement.

Worked Example

A tenant pays ₹60,000/month rent from April to March (₹7,20,000 for the year). Since the monthly rent exceeds ₹50,000, TDS at 2% applies on the full year’s rent: ₹7,20,000 × 2% = ₹14,400, deducted from the March rent payment and deposited within 30 days via Form 141.

If the landlord doesn’t provide a valid PAN, the deduction rate jumps to 20% instead of 2%.

Special Situations

•             Jointly-owned property: Where a property has multiple co-owners and each co-owner’s identifiable share of rent is below the ₹50,000/month threshold, TDS need not be deducted for that co-owner’s share — examine the threshold co-owner-wise, not on the aggregate rent. If shares aren’t clearly identifiable, or if a single co-owner’s share exceeds the threshold, TDS must be deducted on the full amount attributable to that share.

•             Joint tenants: If each co-tenant is independently party to the lease and pays their own share (each below ₹50,000/month), TDS may not apply to any of them. But if one tenant is the sole party on the lease and others merely reimburse them, the full rent is treated as paid by that one tenant, and the threshold is tested on the combined amount.

•             Cash payments: Paying rent in cash above ₹20,000 in a day can trigger disallowance of the deduction for the payer under separate anti-cash provisions — always route rent through banking channels.

Penalties for Non-Compliance

Frequently Asked Questions

Q1. Has the rent threshold changed under the new Act? The rates and thresholds themselves are unchanged from the amended position under the 1961 Act — only the section numbering (now Section 393) and form names (now Form 141, Form 140/131) have changed. The unified ₹50,000/month threshold across all rent-TDS categories was introduced through the Finance Act 2025 and continues under the new Act.

Q2. As an individual tenant, do I need to apply for a TAN? No. Section 393(1), Table 1, Sl. No. 2(i) (the successor to Section 194-IB) specifically exempts individual/HUF tenants not liable to tax audit from obtaining a TAN — your PAN is sufficient.

Q3. Can a landlord avoid TDS on rent if their income is below the taxable limit? Yes. The landlord can submit Form 121 (the consolidated successor to Forms 15G/15H) to the tenant, requesting nil deduction, if their estimated total income for the year is below the basic exemption limit.

Q4. What if I forget to deduct TDS on rent for a few months and only realise later? Deduct the outstanding TDS immediately, deposit it along with the applicable interest, and file/revise Form 141 (or Form 140, for business payers) at the earliest — the interest exposure grows every month of delay.

Rent paid or credited up to 31st March 2026 continues to be governed by Sections 194-I and 194-IB of the Income Tax Act, 1961, using the old forms (Form 26QB/26QC, Form 16A/16C).