What is TDS on rent?

TDS on rent refers to tax deducted at source on rental income from properties like land, buildings, equipment, furniture, fittings or any land adjacent to a building.

What is section 194I of The Income Tax Act?

Section 194I of The Income Tax Act, 1961, mandates that individuals or entities paying rent must deduct TDS. As per the Budget 2025 update, TDS applies only if the rent exceeds Rs 50000 per month . However, it is important to note that the limit for TDS on rent was previously ₹ 2,40,000 and will remain so for FY 2024-25.

What is the meaning of ‘Rent’ in the context of section 194l?

While learning about TDS on rent, it is also imperative to know more about what the term ‘rent’ actually signifies. Rent means any payment, which is made under any sub-lease/ lease/ tenancy/ arrangement/ agreement for using the following

• Building (inclusive of factory buildings)
• Land
• Land appurtenant to any building (inclusive of factory buildings)
• A plant like an industrial or manufacturing facility
• Equipment like tools, computer systems, networks, other infrastructure required for running a business
• Machinery
• Fittings
• Furniture

What is the applicability of TDS on rent?

TDS on rent payment applies if the rent exceeds ₹ 50000 per month. If your annual rent is within this limit, you do not need to deduct TDS. Individuals and HUFs are required to deduct TDS on rent only if their business is subject to a tax audit under income tax laws. However, if the rent remains within ₹ 50000 per month or the payer is not liable for a tax audit, TDS deduction is not required under Section 194I.

Who is liable to deduct TDS under section 194I?

The following entities are liable to deduct TDS on rent:

• Any person except individuals and HUFs paying rent to a resident Indian
• Individuals and HUFs if their income is subject to a tax audit under prevailing income tax laws

Tax (TDS) deduction rates

Tax (TDS) has to be deducted at the time of crediting/paying the income by way of rent to the payee account through a cheque/draft/cash or other payment methods. The rates of TDS can be summed up as follows:

• Rent for plant/ equipment/ machinery- 2% TDS on the rent amount paid
• Rent for land/ building/ furniture/ fittings- 10% TDS on the rent amount paid
• Individual/ HUF not liable to tax audit - 5% TDS on the rent paid in cases where more than `50,000 is paid per month as rent.

Tax (TDS) deduction rules to keep in mind

You must know a few regulations regarding the TDS on rent.

• Tax (TDS) is required to be deducted by the person paying the rent from the rent payable and pay it to the government
• TDS applies in case the aggregate of the rent amount that is paid/credited or expected to be paid/credited crosses `2,40,000 per financial year
• Individuals or Hindu Undivided Family (HUF) who are not subject to tax audits are liable to deduct tax (TDS) at 5% of the rent under Section 194IB of the Income Tax Act 1961

Key timelines for TDS deductions

Tax (TDS) has to be deducted at the time of payment or credit of rent to the owner or landlord. Payment to the government needs to be made within 7 days from the end of the month in which the deduction is made. In case the amount has been paid/ credited in March, the deadline is 30^th of April.

How to save on income tax with life insurance?

You can save on income tax with insurance investments under Sections 80C, 80D & 10(10D). The following are the savings that you can garner in this regard:

• Section 80C offers tax benefits up to `46,800* on life insurance premiums paid annually. However, this is not just about life insurance but also for Public Provident Fund(PPF), Equity-Linked Savings Scheme(ELSS), Senior Citizens Saving Scheme, Sukanya Samriddhi Scheme, National Savings Scheme(NSC), tax-saver Fixed Deposits(FDs) and the payment of home loan principal amount.
• Section 80D offers tax benefit up to `7,800* on health insurance premium paid for yourself, your spouse and children and tax benefit upto `7,800 on health insurance paid for parents below the age of 60. In case parents are above the age of 60, you can claim deductions up to `50,000 from taxable income for their health insurance plans annually. This works out to a maximum of `50,000 for your parents (if they are above the age of 60) and `25,000 for yourself and your family members. Within the maximum limit, you can get deductions up to `5,000 on preventive health check-ups too.
• Benefits received under insurance policies are exempt subject to conditions under Section 10(10D)

Understanding TDS on rent is vital if you are planning to rent or lease a home or other property from a landlord/property owner in the near future.