Overview

The TDS provisions for the Fiscal year 2026-27 (AY 2027-28) for rent are regulated by the newly structured Income Tax Act, 2025, particularly u/s 393, which consolidates the earlier section-based framework.

However, the administrative section numbers have been converted to a simplified tabular format for submitting returns; the tax rates and exemption limits have stayed unchanged from the earlier structure, in line with key updates rolled out in Union Budgets.

The breakdown of TDS on rent that includes the applicable sections, thresholds and rates for FY 2026-27 is mentioned below.

New Section Introduced for TDS on Rent under Income Tax Act

  • TDS on Rent u/s 194-I: Transition to Section 393 Table Code Reporting: The same section applies to corporate entities, firms, trusts, AOPs, as well as individuals and HUFs that were subject to a tax audit u/s 44AB in the previous financial year.
  • TDS on Rent u/s 194-IB: Transition to Section 393 Table Code Reporting: It is applicable to individuals and HUFs who are not included under the tax audit provisions of Section 44AB. Salaried individuals or small business owners use it for renting residential properties.
Payment TypeSection as per the IT Act 2025
Plant and Machinery393(1)[Sl.2(ii).D(a)]
Land or Building or Furniture393(1)[Sl.2(ii).D(b)]

TDS on Rent: Threshold Limit and Applicable Rules

Rs 50,000 per month (effectively Rs 6,00,000 per annum). The requirement of TDS arises when the total rent paid or payable to a single landlord surpasses this limit during the fiscal year.

TDS Rates on Rent: Applicable Rates and Rules

  • 2% for renting of plant, machinery, or equipment.
  • 10% for renting of land, building (residential or commercial), furniture, or fittings.

TDS Deduction Timeline

During crediting rent to the payee’s account or at the payment time (cash, cheque, draft), whichever is earlier.

Return Reporting Codes (New Act)

  • Code 1008 - for plant and machinery
  • Code 1009 - for land, building, or furniture

Compliance

Under the Income Tax Act, 2025, Form 141 replaces Form 26QC for reporting and depositing Tax Deducted at Source (TDS) on rent paid for property.

TDS u/s 195: Rules and Procedures for Rent Payments to Non-Resident Indians

Section 194-I or Section 194-IB is not applicable if the landlord is an NRI. Tax is required to be deducted u/s 195, which is now Section 393(2)[Table: Sl. No. 17] under the new IT Act.

Exemption Threshold Limit

No threshold limit applies. TDS must be deducted on the entire amount of rent paid, even if it is just ₹1.

Know More About the Applicable TDS Rate

30% (plus applicable surcharge and health and education cess). If the landlord has received a Lower Deduction Certificate from the Income Tax Department or is entitled to benefits under a DTAA, a lower rate can be applicable.

Table: Old vs New Section


Closure

When rent exceeds the applicable threshold limit, TDS deduction becomes mandatory. TDS under Section 194-I applies to specified rent payments, while Section 194-IB applies to individuals and HUFs paying monthly rent exceeding ₹50,000. Proper deduction, timely payment, and accurate filing can help avoid interest, penalties, and notices from the Income Tax Department. For smooth TDS e-filing, SAG Infotech’s Gen TDS Software helps automate tax calculations, validate applicable thresholds, manage rent-related transaction data, and streamline TDS return preparation and e-filing, helping reduce compliance errors and save time.