The short answer
There are two rent rules, depending on who the tenant is.
Individual or HUF tenant not liable to tax audit, paying rent above ₹50,000 for a month or part of a month: deduct TDS at 2% — once a year, from the rent for the last month of the tax year or the last month of the tenancy, whichever comes first. File it with your own PAN through Form 141 (which replaced Form 26QC from 1 April 2026). No TAN is needed. This was section 194-IB of the 1961 Act; from 1 April 2026 it is in section 393(1) of the Income-tax Act, 2025.
Any other tenant — a company, firm, LLP, or an individual or HUF liable to audit — paying rent above ₹50,000 for a month or part of a month: deduct 10% on rent for land, buildings, furniture or fittings (2% for plant and machinery), at the time of each credit or payment, and deposit it monthly using a TAN. This was section 194-I of the 1961 Act; it is now also in section 393(1) of the 2025 Act. The ₹50,000-a-month threshold replaced the earlier ₹2,40,000-a-year threshold from 1 April 2025 under the Finance Act, 2025.
If the landlord does not give a PAN, the rate rises to 20%. For an individual or HUF tenant, the deduction is capped at the last month's rent.
If the landlord is a non-resident, neither of these applies; the tenant deducts tax at the rates in force (normally 30% plus surcharge and cess on rent) under section 393(2) of the 2025 Act (section 195 of the 1961 Act), with no threshold.
A note on section numbers: the Income-tax Act, 2025 has applied from 1 April 2026 (the start of tax year 2026-27). Anything that happened before that date — a sale, a rent payment, a deduction — is governed by the Income-tax Act, 1961 and its section numbers. This guide gives both numbers where the new one has been confirmed.
Individual and HUF tenants: the 2% rule
Who must deduct: an individual or HUF who is not required to have their accounts audited under the income tax law (broadly, whose business turnover or professional receipts in the previous year did not cross the audit limits), paying rent to a resident landlord for any land or building, furnished or not, whether used as a home or otherwise.
Threshold: rent above ₹50,000 for a month or part of a month. Rent of exactly ₹50,000 does not trigger it.
Rate: 2%. The Finance (No. 2) Act, 2024 reduced it from 5% to 2% with effect from 1 October 2024. A deduction made before that date was at 5%.
When: once a year, at the time of credit or payment of rent for the last month of the tax year (March) or the last month of the tenancy if it ends earlier — whichever is earlier. The 2% is computed on the rent for the whole period covered.
How: file Schedule A of Form 141 (the challan-cum-statement under the Income-tax Rules, 2026) on the income tax portal with your PAN and the landlord's PAN, and pay the tax, within 30 days from the end of the month in which you deducted. Then download the TDS certificate (Form 132, which replaced Form 16C) from the TRACES portal and give it to the landlord within 15 days of the due date for Form 141.
For a deduction made before 1 April 2026, the 1961 Act forms apply: Form 26QC and Form 16C.
Businesses and audited individuals: the 10% rule
Who must deduct: any person other than an individual or HUF not liable to audit — companies, firms, LLPs, trusts, government bodies, and individuals or HUFs whose accounts are audited.
Threshold: rent above ₹50,000 for a month or part of a month, from 1 April 2025. Before that, the threshold was ₹2,40,000 in the year.
Rate: 10% for land, buildings (including factory buildings), land appurtenant to a building, furniture and fittings; 2% for plant, machinery or equipment.
When: at the time of credit or payment of each month's rent, whichever is earlier — not once a year.
How: deposit by the 7th of the following month (30 April for deductions made in March) against your TAN; file the quarterly TDS statement in Form 140 (which replaced Form 26Q), due 31 July, 31 October, 31 January and 31 May; issue the TDS certificate in Form 131 (which replaced Form 16A) each quarter.
Whether TDS is calculated on rent including GST: under the 1961 Act, CBDT Circular No. 23/2017 allowed TDS on the amount excluding GST where GST is shown separately on the invoice. Confirm the current position with your chartered accountant; the guide on GST and TDS on commercial rent covers the interaction.
Landlord without PAN
If the landlord does not furnish a valid PAN, TDS is deducted at 20% instead of 2% or 10%. This was section 206AA of the 1961 Act and is carried into the 2025 Act.
For an individual or HUF tenant under the 2% rule, the deduction at 20% cannot exceed the rent for the last month of the tax year or of the tenancy. In practice the tenant may end up paying no rent at all for the final month, with the whole amount going to the government.
A PAN that is inoperative because it was not linked with Aadhaar can be treated as not furnished. Ask for the PAN at the start, check it on the income tax portal, and put it in the rent agreement.
Worked examples
Illustrative numbers only.
1. A salaried tenant pays ₹60,000 a month for a flat from April 2026 to March 2027. Rent for the year: ₹7,20,000. TDS at 2%: ₹14,400. In March 2027 she pays the landlord ₹60,000 − ₹14,400 = ₹45,600, files Schedule A of Form 141 and pays ₹14,400 by 30 April 2027, and gives the landlord Form 132.
2. Same tenant, but the tenancy ends in September 2026 after six months. Rent covered: ₹3,60,000. TDS at 2%: ₹7,200, deducted from the September rent and deposited by 30 October 2026.
3. Same tenant, landlord gives no PAN. TDS at 20% on ₹7,20,000 would be ₹1,44,000, but it is capped at the last month's rent of ₹60,000. She deducts ₹60,000 from the March rent.
4. A tenant pays ₹48,000 a month. The rent does not exceed ₹50,000 for any month, so no TDS is required under either rule, however long the tenancy.
5. A private limited company rents an office at ₹75,000 a month. Each month it deducts 10% = ₹7,500, pays the landlord ₹67,500, deposits ₹7,500 by the 7th of the next month against its TAN, and files Form 140 quarterly. Over the year it deducts ₹90,000.
6. A company rents a residential flat for its director at ₹55,000 a month. The company is not an individual, so the 10% rule applies: ₹5,500 a month. If the company is GST-registered, it also pays 18% GST on the rent under reverse charge; see the guide on GST on a property purchase.
Deadlines, interest and penalties
Late deduction or late payment attracts interest — 1% a month for not deducting and 1.5% a month for deducting but not depositing, under the 1961 Act's rules, carried into the 2025 Act. A late filing fee of ₹200 a day applies until the statement is filed, capped at the amount of TDS. A late statement can also attract a penalty.
A tenant who fails to deduct can be treated as an 'assessee in default' for the tax not deducted. If the landlord has included the rent in their own return and paid tax on it, the tenant may avoid being held in default for the tax itself, but interest still applies; that requires a certificate from a chartered accountant in the prescribed form.
Do not leave the TDS until the landlord asks. File Form 141 the same month you deduct.
What the landlord should do
Give every tenant your PAN in writing at the start, and keep Aadhaar linked so the PAN stays operative.
Check your annual tax statement (Form 26AS / Annual Information Statement) to see the TDS appear, and reconcile it with the rent you received.
Claim the TDS as credit in your return. Rent is taxed under 'income from house property' after a 30% standard deduction; see the guide on income tax on rental income.
If you are a non-resident, tell the tenant. Rent to a non-resident is not under the 2% or 10% rules; it falls under section 393(2) of the 2025 Act at the rates in force, with no threshold, and the tenant needs to follow the non-resident procedure.
TDS on rent and HRA
A salaried tenant who claims house rent allowance exemption under the old regime gives the employer rent receipts and, where annual rent exceeds ₹1 lakh, the landlord's PAN. That is separate from TDS: the HRA claim does not depend on whether you deducted TDS, but an employer or tax officer who sees rent above ₹50,000 a month and no TDS may ask why.
Use the HRA exemption calculator to see what you can claim, and the rent receipt generator or the rent receipt format for receipts that show the PAN, the period and the amount.
Common mistakes
Deducting 5% under the old 194-IB rate after 1 October 2024. The rate is 2%.
Applying the old ₹2,40,000-a-year threshold to a business tenant after 1 April 2025. The threshold is ₹50,000 for a month or part of a month.
An individual tenant applying for a TAN and filing quarterly returns. Under the 2% rule, the tenant uses PAN and Form 141; no TAN is needed.
A company tenant deducting once a year. Under the 10% rule, TDS is deducted every month.
Using Form 26QC for a deduction made on or after 1 April 2026; use Form 141.
Deducting 2% or 10% on rent paid to a non-resident landlord. That is a different provision, at higher rates and with no threshold.
Not collecting the landlord's PAN, and ending up deducting at 20%.
This is general information, not tax or legal advice. Tax law, rates and forms change with each Finance Act; confirm how the rules apply to your own facts with a chartered accountant before you sign, pay or file.
Common questions
Do I need to deduct TDS on my house rent?
If you are an individual or HUF not liable to audit and your rent exceeds ₹50,000 for a month or part of a month, yes: 2% once a year, filed with your PAN in Form 141. Below that, no.
What is the TDS rate on rent in 2026?
2% for individuals and HUFs not under audit (earlier section 194-IB), and 10% for land and buildings (2% for plant and machinery) for others (earlier section 194-I). Both are in section 393(1) of the Income-tax Act, 2025 from 1 April 2026. 20% if the landlord has no PAN.
Which form replaced Form 26QC?
Form 141 (Schedule A) under the Income-tax Rules, 2026, for deductions made on or after 1 April 2026. The certificate to the landlord is Form 132, which replaced Form 16C.
Does an individual tenant need a TAN to deduct TDS on rent?
No. Under the 2% rule the tenant uses PAN. A company or audited tenant deducting 10% needs a TAN.
What is the 194-I threshold now?
₹50,000 for a month or part of a month, from 1 April 2025 (Finance Act, 2025). It was ₹2,40,000 a year before that. From 1 April 2026 the rule is in section 393(1) of the 2025 Act.
What if my landlord does not give a PAN?
Deduct at 20%. For an individual or HUF tenant, the deduction is capped at the last month's rent.
When must the tax be deposited?
Individual tenants: within 30 days from the end of the month of deduction, with Form 141. Business tenants: by the 7th of the next month (30 April for March), with a quarterly statement in Form 140.
My landlord is an NRI. What changes?
The 2% and 10% rules do not apply. Tax is deducted at the rates in force for non-residents, with no threshold, under section 393(2) of the 2025 Act (section 195 of the 1961 Act). Take advice before the first payment.
Sources
- Income-tax Act, 2025, section 393(1) (rent: TDS by individuals/HUFs not under audit at 2% and by others at 10%/2%, threshold ₹50,000 for a month or part) and section 393(2) (payments to non-residents); incometaxindia.gov.in and the Department's FAQs on TDS on rent; checked 2 October 2026
- Income-tax Act, 1961, sections 194-I, 194-IB, 195 and 206AA; Finance (No. 2) Act, 2024 (194-IB rate 5% to 2% from 1 October 2024); Finance Act, 2025 (194-I threshold ₹50,000 a month from 1 April 2025); indiacode.nic.in and indiabudget.gov.in; checked 2 October 2026
- Income-tax Rules, 2026: Form 141 (replacing Forms 26QB, 26QC, 26QD and 26QE), Form 132 (replacing Forms 16B, 16C, 16D and 16E), Form 140 (replacing Form 26Q), Form 131 (replacing Form 16A); incometaxindia.gov.in form pages; checked 2 October 2026
- TDS deposit and statement due dates for tax year 2026-27, Income Tax Department e-filing portal (incometax.gov.in); checked 2 October 2026
Last checked 2026-10-02.