TDS on Rent — Section 194-IB, 194-I & 194H Complete Guide with Rates & Examples
By Parul Singh, GST Practitioner · TDS · Updated June 2026
Table of Contents
Advertisement
TDS on Rent — Overview
In my 15+ years advising businesses and individuals in Karol Bagh and Connaught Place, TDS on rent is one of the most confusing topics — especially since the rules changed significantly with the introduction of Section 194-IB in 2017. Many tenants in Delhi either deduct TDS incorrectly or do not deduct it at all, both of which lead to penalties.
There are now two separate sections for TDS on rent:
- Section 194-I: For businesses and professionals whose total sales/gross receipts exceed ₹1 crore (business) or ₹50 lakh (profession) in the previous year
- Section 194-IB: For individuals and HUFs who are not covered under Section 194-I — typically salaried individuals renting premises for business use
The key difference: Section 194-I TDS is deposited quarterly with TAN, while Section 194-IB TDS is deposited monthly using PAN. Understanding which section applies to you is the first step.
Official Reference: Section 194-I of the Income Tax Act 1961 — TDS on rent for taxpayers with business/professional income exceeding specified limits. Section 194-IB inserted by Finance Act 2017 — TDS on rent by individuals/HUFs not liable to audit under Section 44AB.
📍 Real Example — Connaught Place Office Rent
A private limited company in Connaught Place pays ₹2.5 lakh per month as office rent to a landlord. Since the company's turnover exceeds ₹1 crore, Section 194-I applies. TDS at 10% on rent exceeding ₹2.4 lakh per annum = ₹2.5 lakh x 12 = ₹30 lakh annual rent. TDS of ₹3 lakh per year (₹25,000 per month) must be deducted and deposited quarterly using TAN.
Section 194-I — TDS on Rent by Businesses
Section 194-I applies to any person (other than an individual or HUF) whose total sales, gross receipts, or turnover from business exceeds ₹1 crore, or from profession exceeds ₹50 lakh in the previous financial year.
What qualifies as rent under Section 194-I:
- Land rent (for any purpose)
- Building rent (for office, shop, factory, godown, etc.)
- Land and building rent together
- Machinery rent
- Plant rent
- Equipment rent
- Furniture rent
Threshold for deduction under Section 194-I:
- Rent for land or building: TDS if rent exceeds ₹2.4 lakh per annum (₹20,000 per month)
- Rent for machinery, plant, equipment, furniture: TDS if rent exceeds ₹2.4 lakh per annum
💡 Pro Tip from Parul: The ₹2.4 lakh threshold is per landlord, not per property. If you rent two shops from the same landlord paying ₹1.5 lakh each (total ₹3 lakh annually), TDS must be deducted because the combined rent exceeds ₹2.4 lakh. This catches many tenants in Chandni Chowk and Lajpat Nagar who have multiple rental agreements with the same landlord.
Section 194-IB — TDS on Rent by Individuals
Section 194-IB was introduced specifically to cover individuals and HUFs who pay rent but are not required to get their accounts audited under Section 44AB. This is extremely common in Delhi where small business owners, freelancers, and professionals rent premises.
Conditions for Section 194-IB:
- The payer is an individual or HUF
- The payer is not liable to get accounts audited under Section 44AB
- Monthly rent exceeds ₹50,000
Key differences from Section 194-I:
- Only applies if monthly rent exceeds ₹50,000 (not ₹2.4 lakh annually)
- TDS rate is 5% (not 10%)
- No TAN required — deposit using PAN
- TDS is deposited monthly within 30 days (not quarterly)
- Form 26QC is filed (not Form 26Q)
📍 Real Example — Dwarka Freelancer
Anita is a freelance graphic designer in Dwarka who runs her studio from a rented flat. Monthly rent is ₹65,000. Since she is an individual with income below the Section 44AB audit limit, Section 194-IB applies. She deducts TDS at 5% = ₹3,250 per month. She deposits this using her PAN within 30 days and files Form 26QC. Landlord can claim this TDS credit in their income tax return.
⚠️ Common Mistake: Many tenants in Janakpuri and Vasant Kunj who pay rent above ₹50,000 per month do not deduct TDS under Section 194-IB, thinking it only applies to businesses. This is wrong. Even if you are a salaried individual using a rented property for business purposes, you must deduct 5% TDS if monthly rent exceeds ₹50,000. The penalty for non-deduction is the entire TDS amount plus interest under Section 201.
Section 194H — TDS on Commission
While Section 194-I and 194-IB cover rent, Section 194H covers commission or brokerage payments. This is relevant for businesses that pay commission to agents, brokers, or intermediaries.
Key points about Section 194H:
- TDS at 5% on commission/brokerage payments exceeding ₹15,000 per year (₹2,400 for insurance commission)
- Applies to all taxpayers whose business turnover exceeds ₹1 crore or professional receipts exceed ₹50 lakh
- Commission includes brokerage, agency fees, and similar payments
- Does NOT include discount on sales or rebates
📍 Real Example — Real Estate Broker in Greater Kailash
A real estate developer in Greater Kailash pays ₹4 lakh brokerage to a property dealer for selling a flat. Since the developer's turnover exceeds ₹1 crore, TDS at 5% = ₹20,000 must be deducted under Section 194H. The broker receives ₹3.8 lakh and can claim the ₹20,000 TDS credit in their ITR.
TDS Rates Chart for Rent Payments
| Section | Applicable To | TDS Rate | Threshold |
|---|---|---|---|
| 194-I | Businesses/Professionals | 10% (land/building) | ₹2.4 lakh/year |
| 194-I | Businesses/Professionals | 2% (machinery/plant) | ₹2.4 lakh/year |
| 194-IB | Individuals/HUFs | 5% | ₹50,000/month |
| 194H | Businesses/Professionals | 5% | ₹15,000/year |
Note: If the landlord does not provide PAN, TDS rate doubles to 20% under Section 206AA. Always collect the landlord's PAN before making rent payments.
Official Reference: Section 194-I read with Section 194-IB and Section 206AA of the Income Tax Act 1961. Circular 11/2018 dated 04.05.2018 provides clarifications on TDS on rent payments.
How to Deduct and Deposit TDS on Rent
For Section 194-I (Businesses):
- Deduct TDS at the time of credit or payment, whichever is earlier
- Obtain TAN (Tax Deduction Account Number) if not already held
- Deposit TDS using Challan 281 by the 7th of the following month
- File quarterly TDS return (Form 26Q)
- Issue Form 16A to the landlord quarterly
For Section 194-IB (Individuals):
- Deduct TDS at 5% from the monthly rent payment
- No TAN required — use your PAN
- Deposit TDS using Challan 26QC within 30 days of the end of the month
- File Form 26QC (cumulative return)
- Issue Form 16C to the landlord
💡 Pro Tip from Parul: For Section 194-IB, the simplest way to deposit TDS is through the NSDL portal (tin-nsdl.com) using Challan 26QC. The entire process takes 5 minutes. I guide all my individual clients in Dwarka and Vasant Kunj through this process — once you do it the first time, it becomes straightforward. The key is not to miss the 30-day deadline.
Filing TDS Returns — Form 26QC vs 26Q
The return filing depends on which section applies:
| Aspect | Section 194-I | Section 194-IB |
|---|---|---|
| Form | 26Q (quarterly) | 26QC (cumulative) |
| TAN Required | Yes | No (PAN only) |
| Frequency | Quarterly | Monthly deposit + annual return |
| Certificate to Landlord | Form 16A | Form 16C |
| Due Date | Q1: 15 Jul, Q2: 31 Oct, Q3: 31 Jan, Q4: 31 May | 30 days from end of month |
Common Mistakes in Rent TDS
- Not deducting TDS under 194-IB: Many individuals in South Extension and Greater Kailash pay rent above ₹50,000 without deducting TDS. The penalty is the full TDS amount plus interest.
- Using wrong section: Deducting under 194-I when 194-IB applies, or vice versa. The rates and procedures are different.
- Not collecting landlord PAN: Without PAN, TDS rate becomes 20% under Section 206AA. If you deduct at 5% without PAN, you are liable for the shortfall.
- Missing the deposit deadline: For 194-I, deposit by 7th of next month. For 194-IB, deposit within 30 days of month-end. Late deposit attracts interest at 1.5% per month under Section 201(1A).
- Not issuing Form 16A/16C: The landlord cannot claim TDS credit without this certificate. You must issue it within the prescribed time limit.
- Deducting on security deposit: TDS is only on rent, not on security deposit or advance rent that is adjustable. But if advance rent is non-adjustable, TDS must be deducted.
⚠️ Common Mistake: The consequences of not deducting TDS on rent are severe. Under Section 201, if you fail to deduct or deposit TDS, you are deemed to be an assessee in default. The entire TDS amount becomes payable by you, plus interest at 1.5% per month from the date TDS should have been deducted until actual payment. Additionally, the expense may be disallowed under Section 40(a)(ia), meaning you lose the deduction for the rent paid — this can double your tax liability.
💡 Pro Tip from Parul: If you need help with TDS on rent compliance, contact me at +91 95401 04776. I handle TDS compliance for over 100 clients in Delhi — from large companies in Connaught Place to individual freelancers in Dwarka. The key is setting up the process correctly from day one, rather than scrambling to fix it at year-end.
Advertisement
Frequently Asked Questions
When is TDS on rent required to be deducted?
Under Section 194-I, businesses with turnover above ₹1 crore must deduct 10% TDS on rent exceeding ₹2.4 lakh per year. Under Section 194-IB, individuals/HUFs must deduct 5% TDS if monthly rent exceeds ₹50,000.
What is the difference between Section 194-I and 194-IB?
Section 194-I applies to businesses/professionals liable for tax audit, requires TAN, and TDS is 10%. Section 194-IB applies to individuals/HUFs not liable for audit, uses PAN (no TAN), and TDS is 5% when monthly rent exceeds ₹50,000.
Is TDS on rent applicable on GST amount?
Yes, TDS is deductible on the gross rent amount including GST. If monthly rent is ₹60,000 + ₹10,800 GST = ₹70,800, TDS under Section 194-IB is 5% on ₹70,800 = ₹3,540.
What happens if I do not deduct TDS on rent?
Under Section 201, you become an assessee in default. You must pay the entire TDS amount plus interest at 1.5% per month. Additionally, under Section 40(a)(ia), the rent expense may be disallowed, increasing your taxable income.
How do I deposit TDS under Section 194-IB?
Use Challan 26QC on the NSDL portal (tin-nsdl.com) or through your bank. Deposit within 30 days of the end of the month in which TDS was deducted. No TAN is required — your PAN is sufficient.
Can I claim TDS on rent in my income tax return?
The landlord (payee) can claim the TDS credit in their income tax return. The tenant must issue Form 16A (for 194-I) or Form 16C (for 194-IB) as proof of TDS deducted and deposited.
Advertisement