Everything you need to know about TDS on Rent under Section 194-I
The Finance Bill 2025 has introduced an important change in TDS on rent under section 194-I, which will impact many tenants and landlords. Earlier, TDS on rent was applicable only if the total rent paid to a person exceeded ₹2,40,000 per year. However, with the new amendment, TDS will now be applicable if the monthly rent is above ₹50,000, even if paid for just one month!
Lets understand applicability of TDS based on status of tenant and amount of rent:
The current provision of TDS on Rent under Section 194-I?
| Person Liable to Deduct TDS | When TDS is Applicable? | TDS Rate |
|---|---|---|
| – Any person (other than an individual or HUF) e.g. Company, Firm etc. paying rent. [Irrespective of turnover] |
When total rent in a financial year exceeds ₹2,40,000. | – 10% for land, buildings, furniture & fittings – 2% for plant, machinery & equipment |
| – Individuals/HUF only if their turnover in the previous year exceeds: • ₹1 crore (Business) • ₹50 lakh (Profession) |
When total rent in a financial year exceeds ₹2,40,000. | – 10% for land, buildings, furniture & fittings – 2% for plant, machinery & equipment |
Few case studies based on above provisions:
❎ Case-I: Tenant paid ₹30,000 per month from September 2024 to March 2025
- Total rent paid = ₹30,000 × 7 months = ₹2,10,000
- Since the total rent does not exceed ₹2,40,000, no TDS is applicable.
✅ Case-II: Tenant paid ₹21,000 per month from April 2024 to March 2025
- Total rent paid = ₹21,000 × 12 months = ₹2,52,000
- Since the total rent exceeds ₹2,40,000, TDS is applicable at 10% (or 2% if it is machinery rent).
❎Case-III: Tenant paid ₹55,000 per month for only 4 months
- Total rent paid = ₹55,000 × 4 months = ₹2,20,000
- Even though the monthly rent is high, the total rent does not exceed ₹2,40,000, so no TDS is applicable.
✅ Case-IV: Tenant paid ₹1,00,000 per month for only 3 months
- Total rent paid = ₹1,00,000 × 3 months = ₹3,00,000
- Even though rent is paid for 3 months, but since the total rent exceeds ₹2,40,000, TDS is applicable
The new provision of TDS on Rent under Section 194-I from FY 2025-26
Under the new rule in the Finance Bill 2025, TDS on rent will apply if the rent is more than ₹50,000 per month.
- The annual threshold limit of ₹2,40,000 has been removed.
- Even if rent is paid for just one month, TDS will be applicable.
| Person Liable to Deduct TDS | When TDS is Applicable? | TDS Rate |
|---|---|---|
| – Any person (other than an individual or HUF) e.g. Company, Firm etc. paying rent. [Irrespective of turnover] |
When rent is above 50,000 per month. | – 10% for land, buildings, furniture & fittings – 2% for plant, machinery & equipment |
| – Individuals/HUF only if their turnover in the previous year exceeds: • ₹1 crore (Business) • ₹50 lakh (Profession) |
When rent is above 50,000 per month. | – 10% for land, buildings, furniture & fittings – 2% for plant, machinery & equipment |
Few case studies based on above provisions:
1️⃣ Case 1: Monthly rent per month ₹49,000 for FY 2025-26
- Since the rent is less than ₹50,000 per month, no TDS is required, though annual rent is 5,88,000/-
2️⃣ Case 2: Monthly rent ₹55,000 for 3 months in FY 2025-26
- Since the rent is above ₹50,000 pm, TDS will be deducted. Even though the tenant pays rent for only three month, TDS is still required!
3️⃣ Case 3: Paying rent for just one month (₹60,000)
- Even if a tenant rents a property for just one month and pays ₹60,000, they will have to deduct TDS on the amount.
4️⃣ Case 4: Rent Varies within the financial year
- April 2025 – September 2025 → Rent is ₹49,000 per month (Total = ₹2,94,000)
- October 2025 – March 2026 → Rent is ₹60,000 per month (Total = ₹3,60,000)
- Total rent in FY 2025-26 = ₹6,54,000
- Even if a tenant paid more than 6,00,000/- in FY 2025-26 TDS will be deducted only for those months where rent is above 50,000/- and not on entire 6,54,000/-
Impact of this change
✅ Short-term tenancy now covered. Previously, if a person stayed in a rental property for 2-3 months but paid a high rent, they could avoid TDS if the annual total was under ₹2,40,000. Now, they cannot escape TDS if the monthly rent is more than ₹50,000.
✅ Per month impact: Say you paid 30,000/- for 6 months i.e. 1,80,000 and for next 6 months paid 51,000 during FY 2025-26. In this case TDS will be done only for those month where rent exceeds 50,000.
Key Takeaways
✔ Old Rule: TDS applied only if annual rent exceeded ₹2,40,000, irrespective of monthly rent.
✔ New Rule (FY 2025-26): TDS applies if rent is above ₹50,000 per month, even for a single month or part of the month.
In nutshell, it will be not correct to say TDS threshold under 194I is increased to 6,00,000/-. It is reduced from 2,40,000 per annum to 50,000 per month.
