Tds on Rent

TDS on Rent in India: A Comprehensive Guide (Updated for FY 2025-26)

Section 194I- TDS on Rent

Section 194-I of the Income Tax Act applies when you pay rent for land, building, furniture, or machinery.

• TDS on rent for machinery or equipment – 2%

• TDS on rent for land, building, or furniture – 10%

• TDS needs to be deducted only if the total rent paid in a financial year is more than ₹6,00,000.
  

If the rent is paid to an NRI (Non-Resident Indian), then TDS must be deducted at 30%, no matter how much rent is paid. In addition to this, surcharge and health & education cess are also applicable on the TDS amount. { 30% plus 4% surcharge and health & education cess}

Section 194-I does not apply to individuals or HUFs (Hindu Undivided Families) whose:

• Business turnover was ₹1 crore or less, or

• Professional receipts were ₹50 lakh or less
  in the previous financial year.

In simple terms, if your last year’s income from business or profession is below these limits, you don’t have to deduct TDS under Section 194-I.

Budget 2025 Update: New TDS Rule on Rent (Section 194I)

From 1st April 2025, the government has increased the TDS limit on rent.

👉 Earlier rule:
TDS was required if the total rent paid in a year was more than ₹2,40,000.

👉 New rule (from FY 2025-26):
Now, TDS will be required only if the total rent exceeds ₹6,00,000 per year (that is, ₹50,000 per month).

✅ This change gives relief to small tenants and landlords, as TDS will not apply for smaller rental payments.

TDS on Rent Paid to NRI (Non-Resident Landlord)

If you are paying rent to an NRI (Non-Resident Indian), the rules are different from rent paid to an Indian resident. Here’s a simple explanation 👇

Applicable Section:

Section 195 of the Income Tax Act (not Section 194I)

💰 TDS Rate:

TDS must be deducted on the entire rent amount, there is no threshold limit (even ₹1 paid is covered).
The rate depends on the type of property and income slab of the NRI:

Type of IncomeTDS Rate (Basic)Plus Surcharge & Cess Rent from property (income from house property) 30%+ Surcharge (if applicable) + 4% Health & Education Cess

👉 Effective rate usually comes to around 31.2% (if income is below ₹50 lakh).

Time Limit for Depositing TDS

The Tax Deducted at Source (TDS) amount must be deposited with the government within the prescribed time limits as per the Income Tax Rules.

1. For Non-Government Deductors

• If tax is deducted in March:
  The TDS must be deposited on or before April 30 of the next financial year.

• For deductions made in any other month:
  The TDS must be deposited within 7 days from the end of the month in which the deduction is made.

2. For Government Deductors

• When TDS is paid without challan (book adjustment): Deposit on the same day of deduction.

• When TDS is paid with challan: Deposit on or before 7th of the next month.