TDS on Rent Payment – Section 194I [Ultimate Guide 2025]
Here’s an ultimate guide to decoding the provisions of TDS on Rent- Section 194I of the Income Tax Act. Section 194I deals with TDS on payment of rent for land, Buildings, Plant & machinery including equipment and furniture.
This article provides a detailed insight into Section 194I, covering its applicability, rates, exemptions, and compliance requirements.
TDS on Rent, as per Section 194I, is a provision that requires tenants (not being an individual or HUF) to deduct tax at source before making rent payments to landlords.
The deducted amount is then deposited with the government as income tax on behalf of the landlord.
Section 194I deals with TDS on payment of rent. In this post we will discuss:
- What is Section 194I of the Income Tax Act?
- Meaning of Rent under section 194I
- Time of TDS Deduction
- Applicability of section 194I?
- Rate of TDS on Rent
- TDS on rent limit/ rental income limit (threshold) for TDS
Now, let’s see the provisions of section 194i to get the answers to all these questions.
What is Section 194I?
- Section 194I talks about the provisions of TDS on the payment of Rent.
- The person (not being an Individual or HUF) who is responsible for paying rent is liable to deduct tax at source.
- in case the aggregate of the amount of rent credited or paid or likely to be credited or paid during the financial year exceeds Rs.240,000/- (Rs.600,000 proposed from F.Y 2025-26)
- Individuals or HUFs who are subject to tax audits are also under an obligation to deduct the TDS.
Note: Union Budget 2025 has proposed to increase the threshold limit for deduction of TDS on rent from Rs. 2,40,000 to Rs. 6,00,000 for FY 2025-26 onwards.
Definition of Rent Under Section 194I
For the purpose of this section, rent includes payments made under any lease, sublease, tenancy, or similar arrangement for the use (either separately or together) of the following:
- Land
- Building (including factory buildings)
- Machinery
- Plant
- Equipment
- Furniture or fittings
Applicability of Section 194I
Section 194I applies to a person (not being an Individual or HUF) who is paying any rental income to a resident and is liable to deduct TDS. Where the aggregate rental income paid or credited or likely to be credited during the financial year exceeds Rs.2,40,000.
Therefore, TDS under Section 194I is applicable if:
- The rent is paid to a resident.
- The payer is an individual, HUF, firm, company, or any other entity (except individuals and HUFs who are not required to audit their accounts under the Income Tax Act).
- The total rent paid or payable in a financial year exceeds ₹2,40,000.
Note: As per the Finance Act, 2017, individuals/HUF (not covered under Tax Audit) paying rent to a resident exceeding Rs 50,000 per month are also liable to deduct TDS @ 5% (Effective from 01.06.2017).
Time of TDS Deduction
TDS must be deducted at the earlier of the following events:
- TDS is to be deducted at the time of credit of ‘income by way of rent’ to the account of the payee or
- at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier.
Exemptions and Non-Applicability of Section 194I
Certain cases are exempt from TDS under Section 194I:
- If the total rent paid does not exceed ₹2,40,000 in a financial year.
- If rent is paid to a government entity.
- If rent is paid by individuals or HUFs who are not subject to tax audits under Section 44AB.
- If the recipient provides a lower or NIL deduction certificate under Section 197.
TDS Rate Under Section 194I
The rates of TDS deduction depend on the type of asset rented:
- Land, building, or furniture & fittings – 10%
- Plant, machinery, or equipment – 2%
| S.No. | Nature of payment | Rate |
| 1 | Rent of Plant and machinery | 2% |
| 2 | Rent of land or building or furniture or fittings | 10% |
Note: If the PAN of the recipient is not provided, TDS must be deducted at 20%.
Deposit and Filing of TDS
- Deposit Due Date: TDS deducted must be deposited with the government by the 7th of the following month (except for March, where the deadline is the 30th April).
- TDS Return Filing: The deductor must file a quarterly TDS return in Form 26Q.
- Issuance of TDS Certificate: A TDS certificate in Form 16A must be issued to the deducted.
Consequences of Non-Compliance
Failure to comply with Section 194I can result in penalties and interest:
- Interest on Late Deduction/Deposit: 1% per month for delay in deduction and 1.5% per month for delay in deposit.
- Disallowance of Rent Expense: If TDS is not deducted or deposited, the rent expense may be disallowed under Section 40(a)(ia).
Proper compliance with the provisions of Section 194I will help taxpayers avoid unnecessary legal hassles and maintain good financial health.
Recommended Read:
TDS Rate Chart for the F.Y 2024-25 (AY 2025-26)
TDS Rate Chart for Financial Year 2018-19 & AY 2019-20
Frequently Asked Questions (FAQ) on TDS on Rent – Section 194I
1. What is TDS on Rent (Section 194I)?
TDS on Rent, as per Section 194I of the Income Tax Act, is the provision where a person (the tenant not being an individual or HUF) is required to deduct tax at source before making payment of rent to the landlord.
2. Who is liable to deduct TDS on Rent?
Any person or entity who is making rental payments for a property is liable to deduct TDS on Rent. This includes individuals, businesses, and organizations.
3. When is TDS on Rent applicable?
TDS on Rent is applicable if the total rent paid or payable to the landlord during a financial year exceeds Rs. 2,40,000. If the total rent amount is below this threshold, TDS is not required.
4. What is the applicable TDS rate under Section 194I?
The TDS rate under Section 194I is 10% of the rent amount. However, if the landlord has not provided their PAN, the TDS rate increases to 20%.
5. Is TDS applicable to all types of rent payments?
No, TDS on Rent is applicable only when the annual rent paid or payable to the landlord exceeds Rs. 2,40,000. If the total rent amount for the year is less than this threshold, TDS is not required.
6. When should the TDS on Rent be deducted?
TDS on Rent should be deducted at the time of credit to the landlord’s account or at the time of payment, whichever is earlier.
7. What are the due dates for depositing TDS on Rent?
The deducted TDS on Rent must be deposited with the government every month. The due date for depositing TDS is generally the 7th of the following month in which the deduction is made.
For example, if TDS is deducted in July 2023, it must be deposited by the 7th of August 2023.
8. Are there any exemptions from TDS on Rent?
Yes, there are a couple of exemptions:
(a) Individuals and HUFs not covered under tax audit (Section 44AB) provisions are exempt from deducting TDS on Rent.
(b) If the total rent for the year does not exceed Rs. 2,40,000, TDS is not applicable.
9. Can TDS be adjusted against the landlord’s tax liability?
Yes, the TDS amount deducted by the tenant can be adjusted against the landlord’s tax liability at the time of filing their income tax return. The landlord can claim a credit for the TDS amount deducted.
10. Is there a penalty for non-compliance with TDS on Rent provisions?
Yes, if the tenant fails to deduct TDS on Rent or does not deposit the deducted amount (on or before the due) with the government, they may be subject to penalties and interest as per the Income Tax Act.
11. What are the key documents required for TDS on Rent compliance?
The key documents required for TDS on Rent compliance include:
- Copy of Rent agreement (lease agreement) between the tenant and landlord
- PAN of the landlord
- Copy of TDS Challan
- Proof of deposit of TDS
12. Can a tenant obtain a TDS certificate from the landlord?
Yes, the tenant can request a TDS certificate (Form 16C) from the landlord. This certificate serves as proof of TDS deduction and can be used while filing the tenant’s income tax return.