TDS on Rent Under the Income-tax Act
Tax deduction at source on rent applies to specified payments for the use of land, buildings, machinery, plant, equipment, furniture and fittings. From 1 April 2026, the relevant non-salary TDS rules are consolidated in Section 393 of the Income-tax Act, 2025. Legacy Section 194-I of the Income-tax Act, 1961 remains relevant for payments or credits governed by the earlier Act.
What is rent for TDS purposes?
Rent is wider than ordinary house rent. The legacy statutory definition covered any payment, by whatever name called, under a lease, sub-lease, tenancy or any other agreement or arrangement for the use, separately or together, of land, a building including a factory building, land appurtenant to a building, machinery, plant, equipment, furniture or fittings. Ownership of the asset by the payee was not essential to the definition.
Current rent categories under Section 393
For current reporting, Section 393 distinguishes rent on machinery, plant or equipment from rent on other covered assets such as land, buildings, furniture and fittings. The Income-tax Rules, 2026 list Section 393(1), Table Serial No. 2(ii).D(a) for rent on machinery etc. and Table Serial No. 2(ii).D(b) for rent other than machinery etc.
Who deducts tax on ordinary rent?
The ordinary rent-TDS category applies where the payer is a specified person and the resident payee receives rent covered by the statutory table. Certain individuals and HUFs have a separate PAN-based rent provision under Section 393(1), Table Serial No. 2(i), corresponding to legacy Section 194-IB.
Rate and monetary threshold
The Income Tax Department states that the transition to the Income-tax Act, 2025 was principally a consolidation and simplification of TDS provisions, with rates and monetary thresholds retained rather than changed merely because of the new Act. For an actual deduction, the applicable rate and threshold should be read from Section 393 together with the Finance Act for the relevant tax year.
When is TDS deducted?
The general TDS mechanism continues to depend on the earlier of credit or payment. A credit to a suspense account or another account in the payer's books may be treated as credit to the payee where the statutory deeming rule applies.
Transition from Section 194-I to Section 393
| Earlier event of credit or payment | Applicable law | Provision |
|---|---|---|
| On or before 31 March 2026 | Income-tax Act, 1961 | Section 194-I, where its conditions are satisfied |
| On or after 1 April 2026 | Income-tax Act, 2025 | Section 393(1), relevant Table Serial No. 2 rent item |
For post-1 April 2026 transactions, deductors should quote the relevant Section 393 table item rather than the repealed section number in TDS reporting.
Legacy Section 194-I of the Income-tax Act, 1961
The uploaded version of Section 194-I records a rate of 2 percent for use of machinery, plant or equipment and 10 percent for use of land, building including factory building, land appurtenant to a building, furniture or fittings.
The uploaded historical text also records an annual threshold of Rs. 2,40,000. Because thresholds and payer conditions may have been amended for later periods, the law applicable to the relevant financial year should be checked rather than treating that historical figure as universally current.
Individuals and HUFs under legacy Section 194-I
The source provision included individuals and HUFs whose business or professional turnover crossed the statutory limits in the immediately preceding financial year. Other qualifying individuals and HUFs paying high monthly rent were dealt with separately by Section 194-IB.
Business trust / REIT exception
The legacy text provided that no deduction was to be made under Section 194-I where specified rent was paid or credited to a business trust being a real estate investment trust in respect of a qualifying real estate asset directly owned by that trust, subject to the statutory conditions.
Suspense account rule
Where rent was credited to a suspense account or another account in the books of the person liable to pay it, legacy Section 194-I deemed that credit to be a credit to the payee for purposes of the TDS provision.
Practical rent TDS checklist
Identify the payee: confirm that the landlord or lessor is resident before applying the resident rent table.
Classify the asset: distinguish machinery, plant and equipment from land, buildings, furniture and fittings because the statutory categories differ.
Identify the payer category: determine whether ordinary rent TDS or the special individual/HUF rent provision applies.
Check the threshold: apply the monetary threshold prescribed for the relevant tax year and payment category.
Apply the earlier event: identify when rent is credited or paid, including any statutory suspense-account deeming rule.
Use the current section code: for transactions governed by the 2025 Act, quote the relevant Section 393 table item in the TDS statement.
Related Income Tax provisions
Rent paid by certain individuals or HUFs: legacy Section 194-IB
TDS on transfer of immovable property: legacy Section 194-IA
TDS on payment under specified agreement: legacy Section 194-IC
Commission, brokerage and property TDS
For a live transaction, verify the applicable rate, threshold, payer category, residential status and reporting code for the relevant tax year.