TDS on Rent: Section 194-I and 194-IB Explained (2026)
TDS on rent confuses many taxpayers because there are two different sections — 194-I and 194-IB — that apply to different categories of tenants. Getting this right matters: incorrect or missed deduction creates interest, late fee and disallowance risk.
Two sections, two situations
The simple rule of thumb: Section 194-I applies to businesses and other tenants who are subject to tax audit; Section 194-IB applies to individuals and HUFs who are not liable to tax audit but pay substantial rent.
Section 194-I: business tenants
Under Section 194-I, a tenant (other than an individual/HUF not subject to audit) must deduct TDS on rent if the aggregate rent paid in the year exceeds the prescribed threshold. The rate is generally 10% for land, building or furniture, and 2% for plant and machinery. TDS is deducted at the time of credit or payment, whichever is earlier, and deposited monthly.
Section 194-IB: individual tenants
Section 194-IB was introduced so that high-rent individual tenants (typically salaried persons renting premium accommodation) also contribute to the TDS net. An individual or HUF not liable to tax audit must deduct TDS at 5% if monthly rent exceeds Rs 50,000.
A practical simplification: under 194-IB, the individual deducts TDS only once a year (in the last month of tenancy or the financial year), not every month — and does not need a TAN. The deduction and challan-cum-statement are filed in Form 26QC.
Compliance and deposit
For Section 194-I, the deductor needs a TAN, deposits TDS monthly by the 7th of the following month, and files quarterly returns (Form 26Q). For Section 194-IB, no TAN is needed, and the deduction is reported via Form 26QC with a TDS certificate in Form 16C issued to the landlord.
Common errors to avoid
1. Wrong section — a business tenant mistakenly using 194-IB, or vice versa.
2. Threshold misreading — 194-IB looks at monthly rent (Rs 50,000), not annual.
3. Missing PAN of landlord — absence of landlord PAN pushes TDS to a much higher rate.
4. Late deposit — interest accrues from the due date; the late fee for the statement is separate.
If you are unsure which section applies to your tenancy, a brief check before the first payment avoids costly year-end corrections.
Frequently Asked Questions
What is the TDS rate on rent for individuals?
Under Section 194-IB, an individual or HUF not liable to tax audit deducts TDS at 5% where monthly rent exceeds Rs 50,000. No TAN is required and the deduction is made once a year.
What is the difference between 194-I and 194-IB?
Section 194-I applies to business and audit-liable tenants and requires a TAN with monthly deposit. Section 194-IB applies to individuals/HUFs not liable to audit, with no TAN and an annual deduction reported in Form 26QC.
What happens if the landlord does not provide PAN?
If the landlord does not furnish a PAN, TDS must be deducted at a substantially higher rate, so obtaining the landlord PAN before deduction is important.