What is TDS on rent under Section 194I?

Section 194I requires businesses and firms (other than individuals/HUFs not subject to tax audit) to deduct TDS on rent payments. TDS is deducted at 10% for rent of land, building, or furniture, and at 2% for rent of plant, machinery, or equipment. TDS applies only when annual rent exceeds Rs 6,00,000 (updated threshold from FY 2025-26).

When is TDS on rent applicable?

TDS on rent is applicable when a business or firm pays annual rent exceeding Rs 6,00,000 (Section 194I, updated from FY 2025-26), or when an individual or HUF pays monthly rent exceeding Rs 50,000 (Section 194IB). The threshold determines whether TDS needs to be deducted from the rent payment.

What is the TDS rate on rent for land and building?

Under Section 194I, TDS on rent for land, building, or furniture is 10% of the rent amount. For plant, machinery, or equipment, the rate is 2%. These rates apply when the annual rent paid exceeds Rs 6,00,000 (revised threshold from FY 2025-26).

What is Section 194IB for individual tenants?

Section 194IB applies to individuals and HUFs who are not covered under Section 194I (not liable for tax audit). If monthly rent exceeds Rs 50,000, TDS must be deducted at 2% (reduced from 5% w.e.f. October 1, 2024). No TAN is required for deduction under 194IB. The maximum TDS deductible in a month cannot exceed one month's rent.

Is TDS applicable if rent is below Rs 6 lakh per year?

No. Under Section 194I, TDS on rent is not applicable if the total annual rent paid or payable does not exceed Rs 6,00,000 (revised from Rs 6,00,000 w.e.f. FY 2025-26). Similarly, under Section 194IB, TDS is not required if monthly rent is Rs 50,000 or below.

Do I need a TAN to deduct TDS on rent?

Under Section 194I (for businesses and firms), a TAN (Tax Deduction Account Number) is mandatory for deducting and depositing TDS. However, under Section 194IB (for individuals and HUFs), no TAN is required. The individual can use their PAN to file Form 26QC and deposit TDS.

When should TDS on rent be deposited?

Under Section 194I, TDS must be deposited by the 7th of the following month. Under Section 194IB, TDS must be deposited within 30 days from the end of the month in which the deduction is made, or within 30 days of the end of the tenancy, whichever is earlier.

What is Form 26QC for TDS on rent?

Form 26QC is a challan-cum-statement that individuals and HUFs use to deposit TDS under Section 194IB. It is filed online on the Income Tax Department portal. After depositing TDS via Form 26QC, the tenant must issue Form 16C (TDS certificate) to the landlord within 15 days.

Can a restaurant owner deduct TDS on rent?

Yes. Restaurant businesses typically pay substantial rent for their premises. If the restaurant operates as a firm, company, or any entity liable for tax audit, TDS must be deducted under Section 194I at 10% on rent exceeding Rs 6,00,000 per year (revised threshold from FY 2025-26). This is a common compliance requirement for restaurant owners.

What happens if TDS on rent is not deducted?

If TDS on rent is not deducted when applicable, the payer faces consequences including: disallowance of 30% of the rent as a business expense under Section 40(a)(ia), interest at 1% per month for non-deduction and 1.5% per month for non-deposit, and penalty under Section 271C equal to the TDS amount not deducted.

TDS on Rent Calculator | Free Online TDS on Rent Calculator 2025-26

What is TDS on Rent?

TDS on rent is the tax deducted at source from rent payments made by tenants to landlords. Under the Income Tax Act, 1961, the payer of rent is required to deduct a specified percentage of the rent as TDS before making the payment to the property owner. This deducted amount is deposited with the Income Tax Department on behalf of the landlord.

Two sections govern TDS on rent: Section 194I applies to businesses and firms, while Section 194IB applies to individuals and HUFs who are not covered under 194I. The applicable rate, threshold, and compliance requirements differ between these two sections.

Section 194I requires businesses to deduct TDS at 10% on rent for land/building or 2% for plant/machinery when annual rent exceeds Rs 6,00,000 (revised from Rs 6,00,000 w.e.f. FY 2025-26)
Section 194IB requires individuals and HUFs to deduct TDS at 2% when monthly rent exceeds Rs 50,000 (rate reduced from 5% w.e.f. October 1, 2024)
The landlord can claim credit for TDS deducted when filing their income tax return
Non-deduction of TDS can lead to disallowance of 30% of rent as a business expense under Section 40(a)(ia)

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How is TDS on Rent Calculated?

TDS on rent is calculated by applying the applicable TDS rate to the rent amount. The rate and method depend on whether the payer is a business (Section 194I) or an individual/HUF (Section 194IB).

TDS on Rent = Monthly Rent x TDS Rate (%)

Here is the detailed process for each section:

Section 194I (Business/Firm):

Step 1: Check if annual rent exceeds Rs 6,00,000. If not, no TDS is required.

Step 2: Determine the rent type: 10% for land, building, or furniture; 2% for plant, machinery, or equipment.

Step 3: Deduct TDS at the applicable rate from each monthly rent payment.

Step 4: Deposit TDS by the 7th of the following month.

Section 194IB (Individual/HUF):

Step 1: Check if monthly rent exceeds Rs 50,000. If not, no TDS is required.

Step 2: Calculate TDS at 2% of the monthly rent.

Step 3: The maximum TDS in any month cannot exceed one month's rent.

Step 4: Deposit TDS within 30 days from the end of the month or end of tenancy.

TDS on Rent Calculation with Example

Let us calculate TDS on rent for two common scenarios to understand how the sections work in practice.

Example 1: Restaurant business paying rent (Section 194I)

Monthly Rent: Rs 1,00,000

Annual Rent: Rs 12,00,000 (exceeds Rs 6,00,000 threshold)

Rent Type: Land and Building

TDS Rate: 10%

Monthly TDS: Rs 1,00,000 x 10% = Rs 10,000

Annual TDS: Rs 10,000 x 12 = Rs 1,20,000

Effective Monthly Rent (after TDS): Rs 90,000

Due Date: 7th of the following month

Example 2: Individual paying rent (Section 194IB)

Monthly Rent: Rs 75,000 (exceeds Rs 50,000 threshold)

TDS Rate: 2% (revised w.e.f. October 1, 2024)

Monthly TDS: Rs 75,000 x 2% = Rs 1,500

Annual TDS: Rs 1,500 x 12 = Rs 18,000

Effective Monthly Rent (after TDS): Rs 73,500

No TAN required. File Form 26QC online.

Section 194I vs Section 194IB: Key Differences

Understanding the difference between these two sections is essential for correct TDS compliance. Here is a detailed comparison:

Parameter	Section 194I	Section 194IB
Applicable To	Businesses, firms, companies, trusts	Individuals, HUFs (not liable for tax audit)
Threshold	Annual rent exceeding Rs 6,00,000	Monthly rent exceeding Rs 50,000
TDS Rate (Land/Building)	10%	2%
TDS Rate (Plant/Machinery)	2%	Not applicable
TAN Required	Yes, mandatory	No, PAN is sufficient
TDS Return Form	Form 26Q (quarterly)	Form 26QC (per transaction)
TDS Certificate	Form 16A	Form 16C
Deposit Due Date	7th of following month	Within 30 days of month-end or tenancy end

Restaurant owners, being business entities, typically fall under Section 194I and must obtain a TAN for TDS compliance. Individual tenants paying rent for personal residential premises fall under Section 194IB.

TDS on Rent Rates for FY 2025-26

Here are the applicable TDS rates on rent for the current financial year:

Section	Rent Type	TDS Rate	Threshold
194I	Land, Building, Furniture	10%	Annual rent > Rs 6,00,000
194I	Plant, Machinery, Equipment	2%	Annual rent > Rs 6,00,000
194IB	Any property (residential)	2%	Monthly rent > Rs 50,000

If the landlord does not provide their PAN to the payer, TDS must be deducted at a higher rate of 20% under Section 206AA. This makes PAN collection from the landlord a critical compliance step before making rent payments.

Additionally, if the landlord has a lower or nil deduction certificate under Section 197, the payer can deduct TDS at the rate mentioned in the certificate instead of the standard rates.

Why is TDS on Rent Important for Restaurant Owners?

Rent is one of the largest recurring expenses for any restaurant business. For most restaurant owners, the monthly rent for commercial premises significantly exceeds the Rs 6,00,000 annual threshold, making TDS on rent a mandatory compliance requirement. Here is why it matters:

Business expense protection: If TDS on rent is not deducted when applicable, 30% of the rent paid cannot be claimed as a business expense under Section 40(a)(ia). For a restaurant paying Rs 1 lakh monthly rent, this means Rs 3.6 lakh of disallowed deductions annually
Cash flow planning: Knowing the exact TDS amount helps restaurant owners plan monthly cash outflows. Use the restaurant break-even calculator to factor in rent and TDS in your financial planning
Compliance and penalties: Late deduction attracts interest at 1% per month, and late deposit attracts 1.5% per month. Penalty under Section 271C can be equal to the TDS amount not deducted
Multiple premises: Restaurant chains operating from multiple locations must track TDS on rent for each property separately, making accurate calculation essential
GST on rent: In addition to TDS, rent for commercial property may attract GST at 18%. TDS is calculated on the rent amount excluding GST, not on the total amount including GST

How to Use This TDS on Rent Calculator

This free calculator helps you determine the exact TDS to be deducted on your rent payments for FY 2025-26. Here is how to use it:

Step 1: Select your payer type. Choose "Business/Firm (194I)" if you are a company, partnership firm, or entity liable for tax audit. Choose "Individual/HUF (194IB)" if you are an individual or HUF paying rent for personal use
Step 2: If you selected 194I, choose the rent type: "Land/Building" (10% TDS) or "Plant/Machinery" (2% TDS)
Step 3: Enter your monthly rent amount in rupees
Step 4: Select the rental period: 12 months for a full year, or Custom if the tenancy is for a partial year
Step 5: Click "Calculate TDS on Rent" to see your monthly TDS, annual TDS, effective rent, and applicable section

Download the PDF for a complete TDS on rent report with compliance notes and due date information. Businesses can automate TDS computation and filing through Attendo, which handles monthly TDS deduction, challan generation, and government filing.

TDS on Rent Calculator