TDS on Rent Under explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Key Highlights
- Section 397 (old 194IB): Individuals/HUF paying rent above Rs 50,000/month — TDS at 2% (reduced from 5% — Budget 2024)
- Section 399B (old 194I): Companies/firms paying rent — TDS at 10% (land/building) or 2% (plant/machinery)
- Section 399B threshold: Rs 2,40,000/year
- TDS on rent is deducted annually (Section 397 for individuals) or monthly (Section 399B for businesses)
- Form 16C: TDS certificate issued by tenant to landlord under Section 397
- Form 26QC: TDS return for Section 397 transactions
1. Section 397: TDS on Rent by Individuals and HUF
Applicable when an individual or HUF (who is not subject to tax audit) pays rent to a landlord for residential or commercial property:
- Threshold: Rent exceeds Rs 50,000 per month
- TDS Rate: 2% (reduced from 5% by Budget 2024, effective 1 October 2024)
- When to deduct: At the end of the financial year OR when leaving the property — whichever is earlier
- One-time annual deduction (not monthly)
- TDS return: Form 26QC filed within 30 days
- TDS certificate: Form 16C issued to landlord within 15 days of Form 26QC
2. Section 399B: TDS on Rent by Businesses
Applicable when any taxpayer (company, firm, LLP, individual subject to audit) pays rent for use of land, building, or equipment:
- Threshold: Rs 2,40,000 per year (aggregated across the year)
- Rates: 10% (land, building, furniture, fittings); 2% (plant, machinery, equipment)
- When to deduct: Monthly or at the time of credit — whichever is earlier
- TDS return: Form 26Q quarterly
3. Comparison: Section 397 vs Section 399B
| Feature | Section 397 | Section 399B |
|---|---|---|
| Applicable to | Individual/HUF (non-audit) | All — companies, firms, audit cases |
| Threshold | Rs 50,000/month | Rs 2,40,000/year |
| Rate (land/building) | 2% | 10% |
| Rate (machinery/plant) | N/A | 2% |
| Deduction timing | Annual (at year end or exit) | Monthly (at credit/payment) |
| TDS return | Form 26QC | Form 26Q |
| TDS certificate | Form 16C | Form 16A |
4. Practical Example: Individual Paying Rent
Illustrative only. Amit rents a house in Delhi for Rs 60,000 per month (above Rs 50,000 threshold). Full year rent = Rs 7,20,000. At year end (31 March 2027), he deducts TDS: Rs 7,20,000 x 2% = Rs 14,400. He files Form 26QC within 30 days and pays Rs 14,400 to the government. He issues Form 16C to his landlord for Rs 14,400 TDS.
5. Higher TDS for No PAN Landlord
If the landlord does not provide PAN, TDS under Section 397 must be deducted at the higher of 2% or 20% — resulting in TDS of 20%. Always collect landlord PAN before making rent payments to avoid this higher rate and the associated complications.
6. Why TaxClue
TDS on rent compliance — Form 26QC filing, Form 16C issuance, and rate determination — requires precision. TaxClue assists both tenants with TDS compliance and landlords with TDS credit reconciliation. Contact us for TDS on rent advisory under ITA 2025.
Key Facts About TDS on Rent Under
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is TDS on rent and who must deduct it?
TDS on rent must be deducted by tenants paying rent for property. Under ITA 2025, there are two provisions: Section 397 applies to individuals and HUFs paying rent above Rs 50,000 per month — TDS at 2% (reduced from 5% by Budget 2024). Section 399B applies to companies, firms, and audit-case individuals/HUFs paying rent above Rs 2,40,000 per year — TDS at 10% (land/building) or 2% (plant/machinery).
What is the TDS rate on rent after Budget 2024?
Budget 2024 reduced the TDS rate under Section 397 (old 194IB) from 5% to 2% for rent paid by individuals and HUFs — effective 1 October 2024. The Section 399B (old 194I) rate remains 10% for land and building rent and 2% for plant and machinery. So an individual paying Rs 60,000 per month rent to a landlord now deducts only 2% TDS annually (at year end) instead of the earlier 5%.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
TDS on Rent Under: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.