TDS · Rent
194i Of Income Tax Act (India, 2026)
Section 194-I is the rule that puts TDS on rent. If a business pays rent above a yearly limit for premises, machinery or equipment, it has to deduct a small amount of tax and deposit it, rather than pay the landlord in full. The rate is not one number: it depends on what is being rented. This guide explains what section 194-I covers, the 2% and 10% rates, the threshold, who deducts, and how the landlord claims the TDS back.
- What it is: TDS on rent for land, buildings, plant, machinery, equipment, furniture and fittings.
- Rates: 2% for plant, machinery and equipment; 10% for land, building, furniture and fittings.
- Threshold: no TDS until yearly rent to a landlord crosses the limit (revised recently; confirm the current figure).
- No PAN: a higher deduction rate applies if the landlord has not furnished PAN.
- Who deducts: businesses and others, and individuals or HUFs under tax audit; smaller individuals may fall under 194-IB instead.
- Not an extra tax: the landlord claims the TDS as credit against their own tax.
01What section 194-I covers
Section 194-I requires a person paying rent to deduct TDS before paying the landlord, once the rent in a year crosses a threshold. Rent here is defined widely: it covers payment for the use of land, buildings, plant, machinery, equipment, furniture and fittings, whether or not the payer owns them.
The idea is to capture rental income in the tax net at the point it is paid, so the landlord cannot simply leave it out. The TDS is adjusted later against the landlord actual tax.
194-I vs 194-IB
Section 194-I applies to businesses and others required to deduct. A separate rule, 194-IB, makes individuals and HUFs who are not under tax audit deduct TDS on high monthly rent for a house. Do not mix the two: they have different rates and thresholds.
02The rates: 2% and 10%
The TDS rate under 194-I depends on what is being rented.
| What is rented | TDS rate under 194-I |
|---|---|
| Plant, machinery or equipment | 2% of the rent |
| Land, building (including factory building), furniture or fittings | 10% of the rent |
So renting a crane or a machine is deducted at the lower rate, while renting office space, a shop or a factory is deducted at the higher rate. If the landlord has not furnished PAN, a higher deduction rate applies under the general no-PAN rule. The TDS is on the rent amount; GST charged on the rent is generally not part of the base for TDS where it is shown separately.
03The threshold
No TDS is deducted until the rent in the financial year crosses a threshold. Below that limit, the payer pays the rent in full without deducting.
Because this threshold was changed recently, do not rely on an old annual figure. Confirm the current limit for the year on the income tax portal, and remember that it applies per payer to the total rent paid to that landlord in the year, not per payment.
Once the yearly rent is expected to cross the threshold, deduct on the whole rent, not only on the part above the limit.
04Who has to deduct
Section 194-I applies to most payers of rent, with one carve-out for small individuals and HUFs.
- Businesses, companies, firms and others: deduct under 194-I once the threshold is crossed.
- Individuals and HUFs under tax audit: also deduct under 194-I.
- Individuals and HUFs not under tax audit: are outside 194-I, but may fall under 194-IB for high house rent instead.
A payer deducting under 194-I needs a TAN, must deposit the TDS monthly, and files quarterly TDS returns. For a related deduction on commission and brokerage, see section 194-H, and for TDS by e-commerce operators, see section 194-O.
05How the landlord claims it back
The TDS deducted under 194-I is not an extra cost to the landlord. It is deposited against the landlord PAN and shows in their Form 26AS and Annual Information Statement.
- The landlord reports the rent as income in their return.
- They claim the 194-I TDS as credit against their total tax.
- They pay only the balance, or get a refund if the TDS is more than the final tax.
This is why a landlord should give the correct PAN to the tenant: a wrong or missing PAN means the credit may not reach them and a higher rate is deducted. If a mismatch leads to a notice, see income tax notice reply services in India.
06How Claw Tax helps
Claw Tax and Accounts is an online tax, GST and accounting service for India that connects you with a verified chartered accountant at a fixed, published price, with a Claw reviewer checking every filing before it is submitted.
A landlord usually just reports rent and claims the 194-I credit in their return, which can be done yourself on incometax.gov.in. The heavier job sits with the payer: deducting the right 2% or 10%, depositing monthly, and filing quarterly TDS returns without PAN errors that block the landlord credit. With Claw Tax and Accounts, a verified chartered accountant handles the TDS return filing and deposits at a fixed, published price, a Claw reviewer checks each return before filing, and reminders go out before every due date.
This is an online service, and it is not tax advice; a verified CA handles your specifics.
07Frequently asked questions
What is section 194-I of the Income-tax Act?
Section 194-I requires a person paying rent to deduct TDS before paying the landlord, once the rent in the year crosses a threshold. Rent is defined widely, covering land, buildings, plant, machinery, equipment, furniture and fittings. The deducted tax is deposited against the landlord PAN and the landlord claims it as credit when filing a return.
What is the TDS rate under 194-I?
There are two rates. Rent for plant, machinery or equipment is deducted at 2%, while rent for land, buildings (including factory buildings), furniture or fittings is deducted at 10%. A higher rate applies if the landlord has not furnished PAN. The TDS is on the rent amount, and GST shown separately is generally not part of the base.
What is the threshold for TDS on rent under 194-I?
No TDS is deducted until the rent paid to a landlord in the financial year crosses a threshold. This limit was revised recently, so do not rely on an older annual figure; confirm the current threshold for the year on incometax.gov.in. The limit applies to the total rent to that landlord for the year, and once it is crossed you deduct on the whole rent.
Who has to deduct TDS under section 194-I?
Businesses, companies, firms and others paying rent must deduct once the threshold is crossed, and so must individuals and HUFs who are under tax audit. Individuals and HUFs not under tax audit are outside 194-I, but may instead fall under section 194-IB for high monthly house rent. A payer deducting under 194-I needs a TAN and files quarterly TDS returns.
Is TDS on rent an extra tax for the landlord?
No. The TDS is deposited against the landlord PAN and appears in their Form 26AS and AIS. The landlord reports the rent as income, claims the TDS as credit against their total tax, and pays only the balance or gets a refund. Only the timing changes, not the final tax, as long as the landlord gives the correct PAN to the tenant.
What is the difference between 194-I and 194-IB?
Section 194-I applies to businesses and others (and individuals or HUFs under tax audit) paying rent for property, machinery or equipment, at 2% or 10%. Section 194-IB is a separate rule for individuals and HUFs not under tax audit who pay high monthly house rent; it has its own rate and threshold and does not need a TAN. They should not be mixed up.