Section 393(1) of Income Tax Act 2025: TDS on Rent Explained
Introduction to Section 393(1)
Section 393(1) of Income Tax Act 2025 is an important part of TDS compliance. It covers all about rent payments that is a regular part of business operations for many companies, startups, professionals, and even individual taxpayers. Whether it is office rent, warehouse rent, factory premises, or equipment taken on lease, the payer may be required to deduct TDS before making the payment, subject to the category of payer, applicable threshold, and prescribed rate under Section 393(1) of the Income Tax Act, 2025.
From FY 2026-27 onwards, i.e. from 1st April 2026, the provisions related to TDS on rent are governed under Section 393(1) of Income Tax Act, 2025. This section explains when TDS needs to be deducted on rent, who is responsible for deducting it, applicable rates, and the consequences of non-compliance.
Many businesses often focus only on paying rent on time and overlook TDS compliance. Even a small mistake like using the wrong TDS rate, delaying payment, or filing incorrect return details can lead to notices, interest, or penalties later. In this blog, we will understand TDS on rent in a simple and practical way.
What is Section 393(1) of Income Tax Act 2025?
Section 393(1) of Income Tax Act, 2025 deals with TDS deduction on rent payments. In simple terms, when a person pays rent exceeding ₹50,000 for a month or part of a month, TDS may be required to be deducted at the prescribed rate.
The deducted amount must then be deposited with the government within the prescribed timeline. The deductor is also required to file TDS returns and issue TDS certificates accordingly.
The purpose behind this provision is to ensure proper reporting of rental income and improve tax compliance.
What is Considered as Rent Under Section 393(1) of Income Tax Act 2025?
Under Section 393(1) of Income Tax Act 2025, the word “rent” means any payment made under a lease, sub-lease, tenancy, or any other agreement or arrangement for the use of:
- Machinery
- Plant
- Equipment
- Land
- Building, including factory building
- Land appurtenant to a building
- Furniture
- Fittings
Examples include office premises, warehouses, factories, commercial spaces, leased equipment, and machinery. Even if the arrangement is through lease, tenancy, or any similar agreement, the payment may still fall under rent for TDS purposes.
Who is Required to Deduct TDS Under Section 393(1) of Income Tax Act 2025?
TDS liability under Section 393(1) depends on the category of payer and the amount of rent paid. Different TDS rates apply to specified persons and persons other than specified persons.
This may include:
- Companies
- Partnership firms
- LLPs
- Businesses
- Professionals
- Certain individuals and HUFs covered under tax audit provisions
The responsibility of deducting and depositing TDS lies with the payer of rent.
Threshold Limit Under TDS on Rent
TDS under Section 393(1) is applicable when the rent paid or credited exceeds ₹50,000 for a month or part of a month. The threshold applies separately based on the applicable category of payer and the nature of the transaction.
Before deducting TDS, businesses should always verify whether the payment crosses the applicable limit and whether the provision applies to them.
TDS Rates Under Section 393(1) of Income Tax Act 2025
The TDS rate generally depends on the type of asset rented.
|
Category of Payer |
Nature of Asset |
TDS Rate |
Threshold |
|
Person other than specified person |
Rent covered under Section 393(1) | 2% | ₹50,000 per month or part of a month |
| Specified person | Machinery, plant, or equipment | 2% |
₹50,000 per month or part of a month |
|
Specified person |
Land, building, including factory building, land appurtenant to a building, furniture, or fittings | 10% |
₹50,000 per month or part of a month |
Disclaimer: The term “specified person” should be interpreted as defined under the Income Tax Act, 2025.
Using the correct TDS rate is important because incorrect deduction may result in notices, short deduction demand, or correction filing later.
Cases Where TDS on Rent is Not Applicable
TDS under Section 393(1) is not required in certain cases, including:
- Where the rent does not exceed ₹50,000 for a month or part of a month.
- Where payment is made to a business trust being a REIT in respect of a real estate asset directly owned by such business trust.
- Any other exemptions specifically notified under the Income Tax Act, 2025.
When Should TDS Be Deducted Under Section 393(1) of Income Tax Act 2025?
TDS under Section 393(1) is generally required to be deducted at the time of:
- Credit of rent to the account of the payee; or
- Actual payment, whichever is earlier.
However, for rent covered under Sl. No. 2(i), TDS is required to be deducted at the time of credit or payment, whichever is earlier, for:
- The last month of the financial year; or
- The last month of tenancy, whichever is earlier.
After deduction, the amount must be deposited with the government within the prescribed due date.
Documents Required for Section 393(1) of Income Tax Act 2025 Compliance
To ensure smooth TDS compliance under this provision, businesses usually keep the following documents ready:
- PAN of landlord
- TAN of deductor
- Rent agreement
- Payment records
- Bank transaction details
- Challan details
- TDS return records
Proper documentation helps avoid mismatches and makes return filing easier.
Due Dates for TDS Deposit and Return Filing
After deducting TDS, the deductor must deposit the amount with the government within the prescribed due date. Quarterly TDS returns must also be filed within the applicable timelines.
Apart from TDS deposit and return filing, the deductor must also issue TDS certificates to the deductee. Delays in compliance may result in late fees, interest, or penalties.
Because of this, many businesses now maintain monthly compliance tracking to avoid last-minute filing issues.
Consequences of Non-Compliance Under Section 393(1) of Income Tax Act 2025
Ignoring TDS compliance can create unnecessary problems later. Some common consequences include:
|
Default |
Possible Consequence |
|
Failure to deduct TDS |
Interest and penalty |
| Delay in TDS payment |
Interest liability |
|
Late filing of TDS return |
Late filing fees |
| Incorrect return details |
Correction filing and notices |
|
Failure to issue a TDS certificate |
Additional compliance issues |
Even small errors like wrong PAN details or challan mismatch can lead to notices and additional compliance work.
Mistakes That Businesses Often Make
Many TDS notices arise because of simple mistakes that are usually overlooked during filing. Some common issues include:
- Incorrect PAN details
- Wrong TDS rate selection
- Late deduction of TDS
- Delay in deposit
- Incorrect challan mapping
- Mismatch in TDS returns
- Missing due dates
Regular reconciliation and timely filing help avoid these problems.
How Ebizfiling Helps with Section 393(1) of Income Tax Act Compliance
Managing TDS compliance can sometimes be confusing, especially when businesses handle multiple rent payments, different vendors, and monthly filing requirements together.
Ebizfiling helps businesses with complete TDS compliance support under Section 393(1) of Income Tax Act 2025, including:
- TDS calculation assistance
- Timely TDS return filing
- Documentation support
- Due date tracking
- Correction filing assistance
- End-to-end compliance management
Our experts help businesses avoid common filing mistakes and maintain smooth TDS return filing without unnecessary delays or penalties. Get expert assistance from Ebizfiling for smooth and stress-free TDS on rent compliance.
Conclusion
Section 393(1) of Income Tax Act, 2025 plays an important role in regulating TDS on rent payments. Businesses and taxpayers making specified rent payments should understand when TDS is applicable, which rate should be used, and how compliance needs to be maintained.
Timely deduction, deposit, and return filing not only help avoid penalties and notices but also ensure smooth tax compliance throughout the financial year. Moreover, if you wish to understand the earlier provisions of TDS on Rent under Section 194I of the Income Tax Act, 1961, refer to Ebizfiling’s comprehensive blog.
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Frequently Asked Questions
1. Is TDS applicable on refundable security deposit paid with rent?
TDS is generally not deducted on refundable security deposits if the amount is returned without adjustment. However, if the deposit is adjusted against rent or lease charges, TDS applicability may arise on the adjusted portion.
2. Should TDS be deducted on maintenance charges paid along with office rent?
If maintenance charges are separately mentioned and paid independently, TDS treatment may differ. But when maintenance charges are part of a composite rent payment, it is generally considered together for TDS deduction purposes.
3. Is GST included while calculating TDS on rent?
Where GST on rent is separately shown in the invoice, TDS is usually deducted on the rent amount excluding GST. Proper segregation in the invoice is important to avoid incorrect deduction calculations.
4. Does TDS apply if rent is paid to a co-owner of property?
If rent is paid to multiple co-owners separately and individual share does not cross the prescribed threshold, TDS applicability is examined separately for each co-owner instead of total combined rent.
5. Is TDS applicable on advance rent paid for multiple months?
Yes, advance rent payments may attract TDS at the time of payment or credit, even if the rent relates to future months. Timing of deduction becomes important in such cases.
6. Can incorrect PAN of landlord create issues in TDS filing?
Yes, wrong PAN details can lead to higher deduction rates, return mismatches, notices, and difficulty in claiming TDS credit by the landlord. PAN verification before filing is always recommended.
7. Is TAN mandatory for businesses deducting TDS on commercial rent?
In most cases, businesses deducting TDS on rent are required to obtain TAN before depositing tax and filing TDS returns. Failure to obtain TAN may lead to filing and payment issues.
8. How should businesses handle TDS if rent agreement changes during the year?
Whenever rent amount, ownership details, or lease terms change during the year, businesses should review TDS applicability again to ensure correct deduction and reporting in subsequent filings.
9. How does Ebizfiling help businesses manage TDS compliance on rent payments?
Ebizfiling assists businesses with TDS calculation, deduction compliance, return filing, challan reconciliation, and documentation review to help reduce errors, notices, and late filing risks.
10. Why do businesses choose Ebizfiling for rent-related TDS compliance support?
Businesses choose Ebizfiling for practical compliance assistance, timely filing support, accurate documentation handling, and end-to-end guidance that helps simplify recurring TDS obligations and avoid compliance delays.
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