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.

Income Tax Act 2025 note: the section and form numbers below are those of the Income Tax Act, 1961 and the 1962 Rules, which apply to payments up to 31 March 2026. For payments from 1 April 2026 (Tax Year 2026-27), TDS on rent falls under Section 393 of the Income Tax Act, 2025 and is identified by Numeric Payment Codes 1008 (plant or machinery) and 1009 (land, building or furniture); rent paid by an individual or HUF not liable to audit (old Section 194-IB) falls under Section 393(1) and is deposited and reported through Form 141, Schedule A (certificate in Form 132). Under the Income Tax Rules, 2026, Form 26Q becomes Form 140, Form 26QC is merged into Form 141 and Form 16C into Form 132. Old numbers can be checked in the Income Tax Act 2025 finder.

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 2% (for payments from 1 October 2024; 5% earlier, Finance (No. 2) Act, 2024) 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.

Further reading: rates for other payments, deposit and return due dates, and the Section 392/393 changes are in our TDS guide. The firm's TDS return filing service page describes quarterly return support.

Frequently Asked Questions