TDS on Rent for FY 2026-27: Limits and Rates in Focus
From tax year 2026-27, TDS on rent is governed by Section 393(1) of the Income-tax Act, 2025, which replaced the Income-tax Act, 1961 from 1 April 2026. The Income Tax Department's FAQs on TDS on Rent set out two separate routes in the Section 393(1) Table: S. No. 2(ii), which broadly corresponds to the old Section 194-I, and S. No. 2(i), which corresponds to the old Section 194-IB for individuals and HUFs. The limits and rates below are taken from those FAQs.
Who deducts under which entry
- Table S. No. 2(ii): any person other than an individual or HUF who pays rent, and also individuals and HUFs carrying on business or profession whose turnover exceeds Rs 1 crore or gross receipts exceed Rs 50 lakh.
- Table S. No. 2(i): any individual or HUF not covered by S. No. 2(ii), such as a salaried tenant paying high rent for a flat.
TDS applies only where the rent is payable to a resident of India.
Rates and limits for FY 2026-27
| Entry | Asset | Rate | Threshold |
|---|---|---|---|
| S. No. 2(ii) | Plant, machinery or equipment | 2% | Rent above Rs 50,000 for a month or part of a month |
| S. No. 2(ii) | Land, building (including factory building), land appurtenant to a building, furniture or fittings | 10% | Rent above Rs 50,000 for a month or part of a month |
| S. No. 2(i) | Land, building or appurtenant land | 2% | Rent above Rs 50,000 for a month or part of a month |
These rates are not increased by surcharge or health and education cess. Where the payee does not furnish PAN, tax is deducted at the higher of the prescribed rate or 20%. Where property is jointly owned and each co-owner's share is definite and ascertainable, the Rs 50,000 limit applies to each co-owner separately.
"Rent" covers payments under any lease, sub-lease, tenancy or other arrangement for the use of land, buildings, appurtenant land, machinery, plant, equipment, furniture or fittings. For S. No. 2(i), only land, building and appurtenant land count. Where one agreement covers both a building and furniture without a separate split, the FAQs say the rate of 10% or 2% is applied according to the substantial element of the agreement.
When to deduct and deposit
Payers under S. No. 2(ii)
- Deduct at the time of credit of rent or payment, whichever is earlier.
- Deposit within 7 days from the end of the month of deduction; tax deducted in March is due by 30 April.
- File the quarterly TDS statement in Form 140 and issue the TDS certificate in Form 131 within 15 days from the due date of the statement.
- A payee whose tax liability justifies it can apply to the Assessing Officer for a nil or lower deduction certificate under Section 395.
Individuals and HUFs under S. No. 2(i)
- Deduct once, at the time of payment or credit of rent for the last month of the tax year, or for the last month of the tenancy if the premises are vacated earlier.
- No TAN is needed.
- Deposit the tax within 30 days from the end of the month of deduction through Form 141.
- Issue the TDS certificate in Form 132 within 15 days of furnishing Form 141.
What to check now
Accounts payable teams should confirm that vendor masters and payment systems use the Section 393 references, the monthly Rs 50,000 threshold and the correct rate for each asset type, and that quarterly returns are filed in Form 140 rather than the old Form 26Q. Tenants paying more than Rs 50,000 a month should diarise the deduction on the March 2027 rent, or on the final month if they move out earlier, and collect the landlord's PAN in advance to avoid the 20% rate.
Updated on 27 September 2026: Rewritten from the Income Tax Department's FAQs with the Section 393(1) Table entries, rates, thresholds, deduction timing, forms and due dates under the Income-tax Act, 2025.
