TDS on Rent [Section 393(1)]
TDS on rent is basically a pre-paid tax. Instead of the landlord getting all the rent and then paying a big tax bill later, the person paying the rent snips off a small piece of it (the tax) and sends it straight to the government. The person paying the rent has a small job:
- Cut a small percentage of the rent amount.
- Pay the rest to the landlord.
- Deposit that small cut directly with the government on the landlord’s behalf.
Meaning of Rent:
“Rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any –
(a) land; or
(b) building (including factory building); or
(c) land appurtenant to a building (including factory building); or
(d) machinery; or
(e) plant; or
(f) equipment; or
(g) furniture; or
(h) fittings,
As per provisions of section 194I, any person (other than an individual or a HUF) is liable to deduct TDS on rent paid to a resident, if the amount of rent paid / credited during the financial year exceeds the threshold limit.
Who has to deduct TDS?
1. The Payer (Deductor): The one paying the rent. This isn’t just anybody! The liability depends upon the category of payer and the applicable rent provision. The responsibility falls on:
- Companies, firms, LLPs and other persons covered by the provision are required to deduct TDS on qualifying rent payments.
- An individual or HUF not otherwise covered by the specified-person provision is subject to the separate provision for rent payments where the ₹50,000-per-month threshold is crossed.
2. The Receiver (Deductee): The one receiving the rent. This is the landlord, who could be an individual, a company, anyone!
Rate of TDS:
| Nature of asset | TDS Rate |
|---|---|
| Plant / machinery / equipment | 2% |
| Land / building / land appurtenant / furniture / fittings | 10% |
What about Deposits and GST?
- Refundable Security Deposit: This is like a security guarantee. No TDS is cut on this amount.
- Non-Refundable Deposit: This is treated like rent paid in advance, so TDS must be deducted on it.
- GST on Rent: If the rent invoice has GST shown separately, TDS is only calculated on the main rent amount, NOT on the GST part.
Example
- Rent = ₹60,000
- GST = ₹10,800
- Total invoice = ₹70,800
- TDS at 10%: ₹60,000 × 10% = ₹6,000
- TDS is not calculated on ₹70,800 where GST is separately indicated.
Time of Deduction:
The TDS shall be deducted at the time of credit of such rent income to the payee account or at the time of payment, whichever is earlier. The payment date shall be either:
- The date of actual payment of cash or
- The date of issue of cheque, draft, or by any other mode, whichever is earlier.
TDS ON RENT — QUICK SUMMARY
| Particulars | Provision under Income-tax Act, 2025 |
|---|---|
| Section | Section 393(1), Table 2 |
| Individual/HUF paying rent | Table 2(i) – Code 1007 |
| Other specified persons paying rent | Table 2(ii) |
| Machinery / Plant / Equipment | Code 1008 |
| Land / Building / Furniture / Fittings | Code 1009 |
| Threshold – Individual/HUF | ₹50,000 per month or part of a month |
| Threshold – Other specified persons | ₹50,000 per month or part of a month |
| Rate – Plant/Machinery/Equipment | 2% |
| Rate – Land/Building/Furniture/Fittings | 10% |
| Time of deduction | Earlier of credit or payment |
| GST component | Excluded where GST is separately indicated |
| Form | Form 140 – regular quarterly TDS statement; Form 141 applies to specified PAN-based payments covered by that form |