TDS on Rent in India: 194I vs 194IB Explained

The short answer

TDS (tax deducted at source) on rent means the person paying rent sets aside a small percentage and deposits it with the government on the landlord's behalf. Since October 2024, the rate is 2% in most cases. Two rules matter: Section 194I for businesses and anyone liable for tax audit (threshold: rent above ₹1.8 lakh per month), and Section 194IB for individuals and HUFs (threshold: rent above ₹50,000 per month). If your rent is below both thresholds, no TDS is deducted.

Two rules, two thresholds

The mistake most people make is treating "TDS on rent" as one rule. It is two, and you fall into one bucket based on who you are:

• Section 194I — applies to companies, firms, and anyone whose accounts are liable to audit. Deduct 2% when rent for a property exceeds ₹1.8 lakh per month.
• Section 194IB — applies to individuals and HUFs who are NOT liable for audit (the vast majority of tenants). Deduct 2% when rent for a property exceeds ₹50,000 per month.
• The two sections never apply together. You are in one bucket or the other depending on whether you are an audit-liable entity (194I) or an individual/HUF (194IB).

Which bucket are you in?

Ask three questions to know your TDS obligation as a tenant:

• Are you a company, firm, or audit-liable person? → Section 194I. Watch the ₹1.8 lakh/month threshold.
• Are you an individual or HUF (not audit-liable)? → Section 194IB. The threshold drops to ₹50,000/month — a flat renting at ₹55,000/month already crosses it.
• Is the payment actually rent? → TDS applies to payments for land, building, furniture, fittings, plant, machinery, and equipment. A refundable security deposit is not rent and attracts no TDS.

Rates, thresholds, and compliance

The numbers that matter, current as of August 2026 (changed by the 2024 Finance Act, effective 1 October 2024):

• Rate: 2% for both 194I and 194IB (land, building, furniture — down from 10% and 5%). Plant and machinery also 2%.
• Threshold: ₹1.8 lakh/month (194I) and ₹50,000/month (194IB), per property.
• Deduct at the earlier of credit or payment, and deposit it by the 7th of the following month.
• No PAN on record? TDS jumps to 20%.
• Form 16C: at year end the tenant (deductor) issues Form 16C to the landlord showing the TDS paid. Tenants keep rent receipts for their own HRA claims.

What most landlords and tenants get wrong

The common trip-ups, in order of how often they appear:

• "It's residential, so no TDS." — GST may be exempt on residential rent, but TDS is a separate law. An individual renting a ₹60,000/month flat must still deduct 2% TDS under 194IB.
• "My tenant is an individual, so no TDS." — 194IB exists precisely for them, and the ₹50,000/month threshold is easily crossed in Indian metros.
• "Security deposit counts as rent." — It does not. TDS is on rent payable, not on the refundable deposit.
• "I pay rent in cash, so it's fine." — Cash rent does not escape TDS. The obligation is on the payer, not on how payment is made.

GST and TDS are separate

A frequent source of confusion: GST on residential rent is generally exempt, but TDS still applies when the thresholds above are crossed. The two laws run in parallel — exemption under one does not mean exemption under the other. For the GST side of the picture, see our guide on GST on residential rent.

How TenantsFlo helps

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