-
July 6, 2026
-
BySteffy A
TDS deduction on rent under section 194I: Explained
Introduction
Section 194I of the Income Tax Act earlier governed the rules related to TDS on rent in India. Under this provision, tenants were required to deduct tax before making rent payments to landlords if the prescribed conditions were applicable.
However, after the implementation of the new Income Tax Act, 2025 from 1st April 2026, these provisions are now covered under Section 393(1)Section 393(1) now governs the rules relating to TDS on rent, including its applicability, threshold limits, TDS rates, responsibilities of tenants, and consequences of non-compliance.
In this blog, you will understand how Section 194I worked earlier and how Section 393(1) of the Income Tax Act, 2025 now governs TDS on rent provisions.
What is TDS on Rent?
TDS on rent means the tenant has to deduct a small portion of tax before paying rent to the landlord. Earlier, this particular rule was covered under Section 194I of the Income Tax Act, 1961. However, from 1st April 2026, TDS on rent is now governed under Section 393(1) of the Income Tax Act, 2025.
In other words, it means that if the rent amount exceeds the prescribed threshold limit, the tenant must deduct TDS before making the payment and deposit the deducted amount with the government.
Under Section 393(1):
- TDS is generally deducted at 10% on rent paid for land, building, furniture, or fittings.
- The tenant is responsible for deducting and depositing the TDS amount.
- The prescribed threshold limit and applicable conditions should always be checked before deduction.
For a detailed information on the new changes as per Income Tax Act 2025, read our blog on Section 393(1) of Income Tax Act which includes applicability, TDS rates, and compliance.
What is the Threshold Limit for TDS on Rent?
Under the Income Tax Act, 2025, taxpayers should refer to Section 393(1) and the applicable rules or notifications for the current threshold and compliance requirements.
Who is Responsible for Deducting TDS on Rent?
Under the earlier Section 194I, the tenant paying rent above the prescribed limit was responsible for deducting TDS. Similarly, after implementation of the Income Tax Act, 2025, Section 393(1) governs this compliance requirement.
The tenant must:
- Deduct TDS before making rent payment
- Deposit the deducted tax with the government
- File applicable TDS returns
- Issue TDS certificate to the landlord
TDS on rent is generally required to be deducted by:
- Companies
- Partnership Firms
- LLPs
- Trusts
- Co-operative Societies
- Individuals and HUFs liable for tax audit under the Income Tax Act
In case rent is paid to a non-resident landlord, different TDS provisions and rates may apply under FEMA and income tax rules. If you wish to know more about TDS on a non- resident, read the blog.
Also read: Capital Gains in India for non-residents
Consequences of Not Deducting TDS on Rent
Failure to deduct TDS under the earlier Section 194I or the current Section 393(1) of the Income Tax Act, 2025 may result in:
- Interest on delayed deduction
- Penalty for non-compliance
- Dis-allowance of certain expenses
- Additional notices from the Income Tax Department
The taxpayer may also face penalties if the TDS return is not filed correctly or within the prescribed due date.
Consequences of Not Depositing TDS on Time
If TDS is deducted but not deposited with the government within the prescribed timeline, interest and penalties may apply.
Generally:
- Interest may be charged for delay in deduction or TDS payment
- Late filing fees may apply for delayed TDS returns
- Continuous default may lead to further compliance action
Therefore, businesses and tenants should ensure timely deduction and deposit of TDS under Section 393(1) to avoid unnecessary penalties.
|
Compliance Activity |
Due Date |
|
TDS Deduction on Rent |
At the time of credit of rent to the landlord’s account or actual payment, whichever is earlier |
|
TDS Deposit (April to February) |
On or before the 7th day of the following month |
|
TDS Deposit (March) |
On or before 30th April of the following financial year |
|
TDS Return Filing (Q1 – Apr to Jun) |
On or before 31st July |
|
TDS Return Filing (Q2 – Jul to Sep) |
On or before 31st October |
|
TDS Return Filing (Q3 – Oct to Dec) |
On or before 31st January |
|
TDS Return Filing (Q4 – Jan to Mar) |
On or before 31st May |
|
Issue of Form 131 (TDS Certificate) |
Within 15 days from the due date of filing the TDS return |
Expert assistance at Ebizfiling
Ebizfiling helps various businesses, professionals, and property holders in managing TDS on rent compliance smoothly and accurately. Our experts here, assist with calculating the correct TDS amount, preparing challans, filing TDS returns, and ensuring timely deposit of tax under the applicable provisions of the Income Tax Act.
We also help our clients in avoiding common errors such as incorrect PAN details, wrong TDS rates, delayed filing, or non-compliance notices. From documentation support to end-to-end complete TDS compliance management, Ebizfiling ensures a stress-free and error free process for businesses and tenants.
Get expert assistance from Ebizfiling for accurate, timely, and stress-free TDS on rent and TDS return filing compliance.
Conclusion
Earlier, TDS on rent was governed, implemented and enacted under Section 194I of the Income Tax Act, 1961. After implementation of the Income Tax Act, 2025 from 1st April 2026, these provisions are now covered under Section 393(1).
Understanding these provisions is important for tenants, businesses, and property holders to make certain proper TDS compliance and avoid unnecessary penalties. Timely deduction, deposit, and filing of TDS returns helps in maintaining smooth tax compliance and reduce the risk of notices or interest liabilities.
Suggested reads:
Top changes impacting salaried Taxpayers
Frequently Asked Questions
1. If company’s rent agreement and ERP still mention Section 194I. Is there a need to update them after April 2026?
Yes, it’s better to update them. A lot of businesses forget to change section references in ERP, accounting software, or templates, and later the same thing creates confusion during TDS return filing or audits.
2. Will existing rent agreements under Section 194I require modification because of the new TDS section changes?
Not necessarily. The agreement usually remains valid, but checking the TDS clause once is a good idea. Many businesses are simply updating internal compliance references so everything stays aligned with current reporting requirements.
3. If a business pays rent in March 2026 under Section 194I but books the expense in April 2026, which law applies?
TDS on rent is generally required to be deducted at the time of credit or payment, whichever is earlier. During the transition from Section 194I to Section 393(1), businesses should carefully review the timing of transactions and ensure compliance with the applicable law.
4. Will the TDS rates on rent change after the new Income Tax Act becomes applicable?
Mostly the structure remains similar, but businesses should still verify the type of asset involved. Rent for office space and rent for machinery may not always follow the same TDS treatment.
5. Can wrong section reporting in TDS return create notices after FY 2026-27?
Yes, it definitely can. Even if the tax amount is correct, using an outdated Section 194I in returns or challans may later create mismatch issues or correction notices from the department.
6. Will businesses need to change accounting software configurations because of the section transition in Section 194I?
In many cases, yes. Businesses using ERP or automated TDS software may need to update Section 194I mappings and compliance settings before filing starts for the new financial year.
7. How should businesses handle ongoing long-term lease agreements during the transition year?
The safest approach is to review those agreements once before the new financial year starts. Long-term rentals usually create confusion because payments continue across different compliance periods.
8. Can incorrect TDS deduction during the transition period affect expense claims under Section 194I?
Yes. If TDS is deducted incorrectly or reported under the wrong section, it can create problems later during reconciliation, assessment, or while claiming expenses in books.
9. How does Ebizfiling help businesses manage TDS compliance during the section transition of Section 194I?
Ebizfiling helps businesses check applicability, review deductions, update compliance processes, and handle TDS filing properly so small reporting mistakes do not become bigger compliance issues later.
10. Why are businesses taking professional help for rent-related TDS compliance after FY 2026-27?
Mostly because there is confusion around new section references, filing updates, and reporting changes. Businesses want to avoid notices, correction returns, and last-minute compliance problems during the transition phase.
File TDS Returns
Quickly file error-free TDS Returns with EbizFiling. This ensures seamless credit to the deductee. Prices Starting INR 999/-.
About Ebizfiling -
Reviews
Anshul Sharma
09 Apr 2022Great support from team ebizfiling. Whole process was very smooth and transparent. Package suggested to us was value for money. Compliance manager guided us throughout the process of LLP incorporation. Thanks for your kind support
Ganesh Pujari
15 Oct 2017I would give 5 stars to Ebizfiling for everything. Service, Professionalism, Dedication, Timely Action and Good Pricing.
Kavita Desai
09 Dec 2017I would give 5 stars for their efficiency and their services.
July 15, 2026 By Steffy A
Section 144 of the Income Tax Act 2025: SEZ Unit Deduction Introduction Section 144 of the Income Tax Act 2025 continues the deduction available to eligible Special Economic Zone units under Section 10AA of the Income-tax Act, 1961. It applies […]
July 16, 2026 By Steffy A
Form 79 under the Income Tax Act 2025: Investment Fund Filing Guide Overview Form 79 under the Income Tax Act is a statement used by investment funds to report income paid or credited to unit holders. It is furnished under […]
July 10, 2026 By Steffy A
Form 130 under the Income Tax Act for Salary TDS Certificate Introduction Form 130 under the Income Tax Act is the new TDS certificate for salary, pension, and specified senior citizen interest income. It replaces Form 16 from Tax Year […]