C.K. Gupta
Rent TDS now lives in Section 393(1) of the Income-tax Act, 2025 — one table, two routes. Sl. No. 2(ii) covers specified persons — companies, firms and audit-bound individuals/HUFs: 10% TDS on building rent (2% on plant and machinery) when rent exceeds ₹50,000 in a month or part of it, TAN required, quarterly Form 140 filings. Sl. No. 2(i) covers individuals and HUFs not under tax audit who pay over ₹50,000 a month: a flat 2% rate, deducted once for the whole year and filed in Form 141 — no TAN needed. Until 31 March 2026 these were Sections 194-I and 194-IB of the 1961 Act; the rates and the threshold are unchanged. Verified October 2026 · TaxGST.in
“Do I need a TAN for this?” — that is the question a salaried reader sent in last month. He pays ₹55,000 a month for a flat in Noida and had read that rent payers above a threshold must deduct TDS. The short answer: yes, he must deduct TDS, and no, he does not need a TAN. He falls under Section 393(1), Table Sl. No. 2(i), built for ordinary tenants, while businesses and audit-bound professionals follow the entirely different machinery of Sl. No. 2(ii) in the same table. Wrong route means wrong rate, wrong form and wrong deadlines.
If rent TDS is one of several TDS provisions you deal with, our TDS hub collects the guides in one place.
Where Sections 194-I and 194-IB went
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. The old rent-TDS sections did not disappear — they were renumbered into the new Act’s single TDS table, Section 393(1), Table Sl. No. 2, and the scattered challan forms were consolidated:
| Up to 31 March 2026 (1961 Act) | From 1 April 2026 (2025 Act) | What changed |
|---|---|---|
| Section 194-IB — individuals/HUFs not under audit, 2% | Section 393(1), Table Sl. No. 2(i) | Section number and form only — yearly filing is now Form 141 (was Form 26QC) |
| Section 194-I — companies, firms, audit-bound payers, 10% / 2% | Section 393(1), Table Sl. No. 2(ii) | Section number and form only — quarterly return is now Form 140 (was Form 26Q) |
| Section 195 — rent to an NRI landlord, 30% + cess | Section 393(2) | Section number only |
Rates, the ₹50,000-per-month threshold and the deduction timings are identical under both Acts — the new Act renumbered the provisions and consolidated the forms; it did not change the money. The old sections remain the governing law for every rent payment made up to 31 March 2026, so notices, corrections and assessments for those years will keep citing 194-I and 194-IB. Everything below is written in the current Section 393 language, with the old names alongside.
The one question that decides everything
One question decides your route in the table: are you a “specified person” — a company, firm or LLP, or an individual/HUF whose accounts are liable to tax audit? Audit liability follows the old Section 44AB test: business turnover above ₹1 crore (₹50 lakh for a profession) in the preceding year. Specified persons deduct under Sl. No. 2(ii). Everyone else — the salaried tenant, the small shopkeeper not under audit — deducts under Sl. No. 2(i).
Sl. No. 2(ii): specified persons (the old Section 194-I)
- Threshold. TDS kicks in above ₹50,000 for a month or part of a month. (The old ₹2,40,000 annual test ended on 1 April 2025, a year before the new Act.)
- Rates. 10% on land, building (including factory building), furniture and fittings; 2% on plant, machinery or equipment.
- Timing. Deduct monthly, at credit or payment, whichever is earlier; deposit by the 7th of the following month (30 April for March).
- Paperwork. TAN is mandatory; quarterly TDS return in Form 140 — the non-salary return that replaced Form 26Q from FY 2026-27 (due 31 July / 31 October / 31 January / 31 May); TDS certificate to the landlord after filing.
Skip it and the cost is not just interest — 1% per month for late deduction, 1.5% for late deposit. Up to 30% of the rent expenditure itself can be disallowed, and a late return adds a ₹200-per-day fee.
Sl. No. 2(i): individuals and HUFs not under audit (the old Section 194-IB)
- Who. Individuals and HUFs who are not specified persons, paying rent to a resident landlord.
- Threshold. Monthly rent exceeding ₹50,000 — a per-month cliff. Exactly ₹50,000 is safe; the entry triggers only above it.
- Rate. 2%. (It was 5% under the old section until the Finance (No. 2) Act, 2024 cut it to 2% from 1 October 2024.)
- Timing. Deduct once for the whole year — when the rent for the last month of the tax year (or the last month of tenancy, if earlier) is credited or paid. Not monthly.
- Paperwork. Form 141 (challan-cum-statement) within 30 days from the end of the month of deduction. No TAN — your PAN identifies the payment. Issue the TDS certificate to the landlord within 15 days of filing.
If the landlord does not furnish a PAN, tax must be deducted at 20% under Section 397(2) (the old Section 206AA rule), though under Sl. No. 2(i) it cannot exceed one month’s rent.
Side by side
| Particular | Sl. No. 2(ii) — specified persons | Sl. No. 2(i) — individuals/HUFs not under audit |
|---|---|---|
| Old name (before 1 Apr 2026) | Section 194-I | Section 194-IB |
| Who deducts | Companies, firms, LLPs; individuals/HUFs under tax audit | Individuals/HUFs NOT under tax audit |
| Threshold | Rent above ₹50,000 per month | Rent above ₹50,000 per month |
| Rate | 10% building / 2% plant & machinery | 2% |
| Deduction timing | Every month | Once a year, in the last month |
| TAN | Required | Not required |
| Form | Form 140, quarterly | Form 141, once a year |
Three worked examples, with real numbers
Example 1 — the company office (Sl. No. 2(ii)). A private company pays ₹60,000 a month as office rent (₹7.2 lakh a year). That exceeds ₹50,000/month, so Sl. No. 2(ii) applies at 10%: ₹6,000/month, ₹72,000 a year. TAN needed, deposit by the 7th of the next month, Form 140 quarterly, TDS certificate to the landlord.
Example 2 — the salaried tenant (Sl. No. 2(i)). A salaried individual pays ₹60,000 a month for a flat (₹7.2 lakh a year). Sl. No. 2(i) applies at 2%: ₹14,400 for the full year, deducted in one shot when March’s rent is credited or paid. He files Form 141 by 30 April, needs no TAN, and hands the landlord the TDS certificate. Cross-check the arithmetic on our TDS calculator.
Example 3 — the trap. A small business (books under tax audit) pays ₹40,000 a month as shop rent — ₹4.8 lakh a year. Under the pre-2025 rule this attracted TDS (₹4.8 lakh > the old ₹2.4 lakh annual test). Since 1 April 2025 it does not: ₹40,000 a month does not exceed ₹50,000, so no TDS under Sl. No. 2(ii) — and if the shopkeeper were not under audit, Sl. No. 2(i) would not apply either. No TDS at all. But at ₹55,000 a month the picture flips: the audit-bound business deducts 10% under Sl. No. 2(ii) (₹5,500/month); the non-audit individual deducts just 2% under Sl. No. 2(i) (₹1,100/month). Same rent, wildly different treatment — decided entirely by who the payer is.
The landlord’s side
TDS is an advance of the landlord’s own tax, credited in Form 26AS and the AIS and refunded if it exceeds actual liability. The landlord’s one critical duty: share the PAN. Without it, the tenant must deduct at 20% under Section 397(2). And on the purchase side, a different entry in the same table applies: 1% TDS under Sl. No. 3(i) on buying property, also reported through Form 141.
Mistakes that cost real money
- Still deducting 5% as an individual tenant. The rate has been 2% since 1 October 2024.
- Deducting monthly under Sl. No. 2(i). One deduction, in the last month of the year or tenancy.
- Getting a TAN as an ordinary tenant. Unneeded under Sl. No. 2(i).
- Filing the old forms. Form 26QC is now Form 141, and the quarterly 26Q is now Form 140.
- Treating a refundable security deposit as rent. It is not rent — no TDS. GST shown separately on the invoice is also excluded.
FAQs
1. My rent is exactly ₹50,000 a month. Do I deduct TDS?
No. Both entries in Table Sl. No. 2 trigger only when rent exceeds ₹50,000 in a month. Exactly ₹50,000 — even for twelve months — attracts no TDS under either entry.
2. I’m a salaried tenant paying ₹65,000 a month. What do I actually do?
In March (or your last month of tenancy), deduct 2% of the full year’s rent — on ₹7.8 lakh that is ₹15,600 — from that month’s payment. File Form 141 on the e-filing portal within 30 days from the end of that month and pay online. No TAN; your PAN suffices.
3. Does rent TDS apply if my landlord is an NRI?
Neither Sl. No. 2(i) nor 2(ii) applies. Rent to a non-resident falls under Section 393(2) (the old Section 195) — typically 30% plus surcharge and cess with no threshold — and the tenant needs a TAN, deposits monthly and files the quarterly TDS return for non-resident payments.
4. What if I forget to deduct or deposit on time?
Interest at 1% per month for late deduction and 1.5% per month for late deposit, a ₹200-per-day fee for late returns, and — for specified persons — disallowance of 30% of the rent expenditure for non-deduction or non-deposit.
5. My landlord refuses to share a PAN. What should I do?
Deduct at 20% under Section 397(2) — the law gives you no choice. Collect the PAN when you sign the lease. Under Sl. No. 2(i), the 20% cannot exceed one month’s rent.
Sources
- Income-tax Act, 2025 — Section 393(1), Table Sl. No. 2(i) and 2(ii): rent TDS from 1 April 2026 — Sl. 2(i) at 2% for payers other than specified persons, Sl. 2(ii) at 10% (land/building/furniture) and 2% (plant & machinery) for specified persons; threshold ₹50,000 per month or part of a month. Section 393(2) for payments to non-residents and Section 397(2) for the 20% no-PAN rate.
- Income-tax Rules, 2026 — Form 141 (challan-cum-statement for Sl. No. 2(i) and property-purchase TDS) and Form 140 (quarterly non-salary TDS return, replacing Forms 26Q/26QC-era filings from FY 2026-27).
- Sections 194-I, 194-IB, 195 and 206AA of the Income-tax Act, 1961 — the corresponding provisions governing rent paid up to 31 March 2026.
- Finance (No. 2) Act, 2024 — cut the individual rent-TDS rate from 5% to 2% w.e.f. 1 October 2024.
- Finance Act, 2025 — replaced the 194-I annual threshold (₹2,40,000 per financial year) with ₹50,000 per month or part of a month, w.e.f. 1 April 2025.
- Income Tax e-filing portal (Form 141) and TRACES — deposit and certificate timelines. Issuing/administrating bodies: Ministry of Finance, Government of India; Central Board of Direct Taxes (CBDT).
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