CourtKutchehry Special Report
TDS on Rent: What Indian Law Says and How Tenants & Landlords Can Get Relief
Income Tax Act Rules on Rent Payments Explained
Practical Ways to Reduce Burden and Claim Refunds
By Our Legal Reporter
New Delhi: December 11, 2025:
Tax Deducted at Source (TDS) on rent has become a common concern for both landlords and tenants in India. With rising rents in metro cities, many individuals are unsure whether they must deduct tax before paying rent and how landlords can claim relief. The Income Tax Act, 1961, provides clear rules under Section 194I and Section 194IB, but confusion persists.
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This article explains the law in simple terms, highlights thresholds, and provides practical steps for relief.
Section 194I – TDS on Rent by Businesses
- Applicability: Companies, firms, and individuals subject to tax audit.
- Threshold: Rent exceeding ₹2.4 lakh annually.
- Rate:
- 10% for land, building, furniture, fittings.
- 2% for machinery, plant, equipment.
- NRI Landlords: TDS at 30% plus surcharge and cess.
- Compliance: Deduct monthly, deposit with government, file TDS returns.
Section 194IB – TDS on Rent by Individuals/HUFs
- Applicability: Individuals or HUFs not liable for tax audit.
- Threshold: Rent exceeding ₹50,000 per month.
- Rate: 5% of rent.
- Timing: Deduct once in the financial year, usually in the last month of tenancy.
- No TAN Required: Tenants can use PAN for deduction.
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Relief Options for Landlords
- Form 15G/15H:
- Senior citizens or individuals with income below taxable limit can submit these forms to avoid TDS.
- Claim Refunds:
- If TDS is deducted but total income is below taxable limit, landlords can claim refund while filing ITR.
- Adjust Against Tax Liability:
- TDS deducted can be adjusted against final tax payable.
- Proper Documentation:
- Ensure rent agreements, PAN details, and receipts are in place to avoid disputes.
Common Misconceptions
- Myth: TDS applies if landlord earns more than ₹50,000 rent in total.
- Fact: TDS applies if monthly rent paid by tenant exceeds ₹50,000 (Section 194IB).
- Myth: Tenants must deduct TDS for all landlords.
- Fact: Only when thresholds are crossed.
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Practical Example
- If a tenant pays ₹55,000 per month, they must deduct ₹2,750 (5%) as TDS under Section 194IB.
- If a company rents office space for ₹3 lakh annually, it must deduct ₹30,000 (10%) under Section 194I.
Global Context
Countries like the US and UK do not impose TDS on rent but require landlords to declare rental income. India’s system ensures tax collection at source, reducing evasion but increasing compliance burden.
Expert Opinions
Tax experts suggest:
- Tenants should be educated about obligations to avoid penalties.
- Landlords should plan cash flows considering TDS deductions.
- Government should simplify rules for small landlords.
Conclusion
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TDS on rent is a legal requirement under the Income Tax Act. While it ensures transparency, it can burden landlords, especially those with modest incomes. Relief is available through Form 15G/15H, refunds, and adjustments.
By understanding the law and keeping proper documentation, both tenants and landlords can comply smoothly and avoid unnecessary disputes.
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