TDS on Rent FY 2026-27: New Section 393 Rates, Limits and Rules

TDS on rent for FY 2026-27 no longer sits under the section numbers most tenants and accountants grew used to. From 1 April 2026, the consolidated Section 393 of the Income Tax Act, 2025 governs how much tax you deduct before paying rent, whether you're a company renting office space, an individual paying for a flat, or a business remitting rent to an NRI landlord. The rates you already know, 2% on plant and machinery, 10% on land and buildings, and a flat 2% for individuals and HUFs outside tax audit, stay the same. What changes is the section reference, the return codes, and the form you use to deposit the tax. Section 393 groups rent-related TDS into table entries instead of standalone sections, and quoting the old section number on a return filed after April 2026 can trigger a validation error at the department's end.

Why Did TDS on Rent Move to Section 393 of the New Income Tax Act?

The Income Tax Act, 2025 replaced dozens of scattered TDS sections, including 194-I, 194-IB, and 195, with a single consolidated provision, Section 393. Rent-related TDS now falls under specific table entries within this section rather than standalone numbers, though the underlying rates and thresholds carry over unchanged from the 1961 Act.

Under the old law, TDS on rent lived across three separate sections depending on who paid it and to whom. Section 194-I handled businesses and audited taxpayers, Section 194-IB covered smaller individual and HUF tenants, and Section 195 dealt with rent paid to non-residents. Anyone who has filed a TDS return knows how easy it was to cite the wrong section by mistake.

The new Act folds all three into Section 393, organised as tables rather than a wall of separate provisions. Table entries under Section 393(1) cover payments to residents, while Section 393(2) handles non-resident payees, including NRI landlords. Rent gets its own line item within each. The department's own reasoning for this shift is straightforward: a tabular structure is easier to update as new transaction types get added, without disturbing the numbering of everything that comes after it.

TDS on Rent for Companies and Audited Taxpayers: Section 194-I Rules Under Section 393

Companies, firms, trusts, and individuals or HUFs who were tax-audited in the previous year must deduct TDS once rent to a single landlord crosses ₹50,000 a month, or ₹6 lakh a year. The rate is 2% for plant, machinery, or equipment, and 10% for land, buildings, furniture, or fittings, unchanged from the earlier Section 194-I regime.

This threshold jumped from the older ₹2,40,000 annual limit to ₹50,000 a month after Budget 2025, and Budget 2026 has kept it there. That's real relief for landlords whose rent sat just above the old annual cutoff but comfortably under the new monthly one.

Deduction happens at the earlier of crediting the rent to the landlord's account or actually paying it, same as before. If the landlord hasn't shared a PAN, the rate jumps to 20% regardless of what's being rented.

If you're setting up rent payments for a new office or warehouse, it helps to have your GST registration sorted before the lease starts, since most commercial landlords ask for it upfront anyway.

TDS on Rent for Individuals and HUFs Not Under Tax Audit: Section 194-IB Rules

Individuals and HUFs whose turnover stayed under ₹1 crore for business, or ₹50 lakh for a profession, in the previous year deduct TDS at a flat 2% once monthly rent crosses ₹50,000. Unlike most TDS provisions, this deduction happens only once a year, at the end of the tenancy or the financial year, whichever comes first.

This is the section most salaried tenants and small consultants actually run into. Paying ₹55,000 a month for a flat and not running an audited business means Section 194-IB applies to you, not 194-I. The rate dropped from 5% to 2% back in October 2024, and that change has carried straight into the new Act without any further revision.

A TAN isn't required here. Your PAN and the landlord's PAN are enough, which counts as one of the few genuine simplifications in this entire framework. Skip getting the landlord's PAN, though, and the rate climbs to 20%, capped at the last month's rent so you're never forced to deduct more than you're actually paying out.

Getting the rent agreement drafted properly matters too, since the PAN details, tenancy dates, and rent amount on paper need to match what you report. If you need help drafting or reviewing that agreement, legaldev.in offers legal documentation support alongside the tax compliance side.

TDS on Rent Paid to NRI Landlords: Section 195 Explained

When rent goes to a non-resident landlord, Sections 194-I and 194-IB style rules don't apply at all. Section 195 takes over instead, and there's no threshold, meaning TDS applies from the very first rupee, at 30% plus applicable surcharge and cess, unless the landlord holds a lower deduction certificate.

This catches plenty of tenants off guard, especially in cities where NRI-owned flats are common. There's no ₹50,000 monthly cushion here. Pay even ₹20,000 in rent to an NRI landlord and you're expected to deduct tax on it.

The 30% rate feels steep, and honestly, it usually is. Double Taxation Avoidance Agreements between India and many countries can bring that number down, though. If the landlord has secured a Lower Deduction Certificate from the tax department, deduct at whatever rate the certificate specifies instead of the flat 30%. Ask for that certificate before finalising the rent amount, because deducting at the wrong rate later becomes your problem to sort out, not the landlord's.

Old Section vs New Section: TDS on Rent Comparison Table

The table below maps each old TDS on rent provision to its Section 393 equivalent, along with the applicable rate, threshold, and quarterly return form for FY 2026-27, so you can quote the correct reference regardless of which system your accounting software still recognises.

Circulars and clarifications issued under the old Act still hold, as long as they don't clash with anything in the new one, so nobody's starting from a blank slate here. The core logic hasn't changed. What has changed is the paperwork you'll be filing and the codes your software needs updated.

How to Deposit TDS on Rent Using Form 141: Step-by-Step

Form 141 has replaced Form 26QC and now covers TDS on rent, property transfers, and payments to contractors under one unified challan-cum-statement. Individuals and HUFs filing under Section 393(1) for rent select the relevant schedule, enter PAN and rent details, then pay through the e-Filing portal within 30 days of the deduction month's end.

1. Log in to the income tax e-Filing portal and go to e-Pay Tax.

2. Select Form 141 for TDS on transfer of property, rent, or professional payments under Section 393(1).

3. Choose the Deductee Type, corporate or non-corporate, and pick the schedule for rent payments.

4. Enter the landlord's PAN, the rent amount, and the TDS deducted.

5. Review every entry, then proceed to payment through your bank.

6. Download the challan receipt once payment clears, and issue the TDS certificate to your landlord within 15 days of the filing due date.

Deadline to remember: Form 141 for rent under the old 194-IB style rules must be filed within 30 days from the end of the month in which you deducted the tax. Miss it, and interest starts accruing right away.

What Happens If You Don't Deduct or Deposit TDS on Rent?

Skipping TDS on rent attracts interest at 1% per month for non-deduction and 1.5% per month for deducted-but-undeposited tax, plus a penalty under Section 271C that can equal the entire TDS amount. Thirty percent of the rent expense can also get disallowed while computing business income if the deduction was required but never made.

None of this is theoretical. Chartered accountants see clients get notices months after a lease ends, simply because nobody deducted TDS on the final month's rent. The disallowance under the new Act's Section 35(b), which mirrors the old Section 40(a)(ia), hits business income directly. It's not just a compliance headache, it's a real cost that shows up on the balance sheet.

Penalty risk: Late filing of Form 141 or the TDS return adds ₹200 per day under Section 271H, on top of interest, until you catch up. For high-value commercial rent, that number climbs faster than most tenants expect.

Frequently Asked Questions

Q1: What is TDS on rent under the Income Tax Act 2025?  TDS on rent is the tax a tenant deducts before paying rent to a landlord, then deposits with the government. Under the new Act, this obligation is governed by Section 393, which consolidates the older 194-I, 194-IB, and 195 provisions into one framework.

Q2: Which section covers TDS on rent for FY 2026-27?  Section 393 of the Income Tax Act, 2025 covers TDS on rent from 1 April 2026 onward. Rent to residents falls under Table 1 of Section 393(1), while rent to NRI landlords falls under Section 393(2).

Q3: What is the current TDS rate on rent for individuals and HUFs?  Individuals and HUFs not subject to tax audit deduct TDS at a flat 2% once monthly rent crosses ₹50,000. This rate was reduced from 5% in October 2024 and has stayed unchanged in the new Act.

Q4: What is the TDS on rent limit for FY 2026-27?  For businesses and audited taxpayers, the threshold is ₹50,000 per month, or ₹6 lakh annually. For NRI landlords, there's no threshold at all, TDS applies from the first rupee of rent paid.

Q5: Do I need a TAN to deduct TDS on rent as an individual?  No. Deductions under the old Section 194-IB style rules within Section 393 don't require a TAN. Your PAN and the landlord's PAN are enough to file Form 141 and deposit the tax.

Q6: What happens if I don't deduct TDS on rent?  You'll face interest at 1% per month for non-deduction, a penalty under Section 271C up to the full TDS amount, and possible disallowance of 30% of the rent expense in your business income computation.

Q7: Which form is used to deposit TDS on rent now?  Form 141 has replaced Form 26QC, 26QB, 26QD, and 26QE. It's a single challan-cum-statement covering rent, property transfers, and payments to contractors or professionals under Section 393(1).

Q8: When should TDS on rent be deducted?  For businesses under the old 194-I style rules, TDS is deducted at the earlier of crediting or paying the rent. For individuals and HUFs under the old 194-IB style rules, it's deducted once a year, at the end of the tenancy or the financial year.

Q9: What is the TDS rate on rent paid to an NRI landlord?  TDS on rent paid to a non-resident landlord is 30%, plus applicable surcharge and health and education cess, under Section 393(2). This rate can be lower if the landlord holds a Lower Deduction Certificate or qualifies under a DTAA.

Q10: Can a landlord claim TDS deducted on rent while filing ITR?  Yes. TDS deducted on rent shows up in the landlord's Form 26AS and can be claimed as credit against their total tax liability while filing their income tax return.

Q11: Is TDS on rent applicable to a refundable security deposit?  No. A refundable security deposit isn't treated as income, so TDS doesn't apply. If the deposit becomes non-refundable or gets adjusted against rent later, it becomes taxable at that point.

Q12: What documents are needed to file Form 141 for TDS on rent?  You'll need the landlord's PAN, your own PAN, the rent agreement, the total rent paid or payable, and the TDS amount deducted. Keep the rent agreement handy, since it establishes the tenancy period used to calculate the deduction.

Conclusion

TDS on rent for FY 2026-27 keeps the same rates most taxpayers already know: 2% and 10% for residents, 30% for NRI landlords. What's different is the compliance trail, which now runs through Section 393 and Form 141 instead of the old section numbers and forms. Whether you're a business paying office rent, a salaried tenant crossing the ₹50,000 monthly mark, or someone renting from an NRI landlord, get the section reference and the form right from the start. If you're unsure which provision applies to your situation, a quick check with a tax professional beats a notice arriving six months later.

About the Author Hemant Mali | SEO Intern GST compliance expert who transforms complex tax regulations into simple, actionable steps. He is dedicated to helping business owners navigate GST registration and tax filing with ease, ensuring seamless compliance for every entrepreneur.

Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. TDS rates and thresholds are based on provisions applicable as of the publication date and may be revised by future notifications. Please consult a qualified Chartered Accountant or tax professional before making compliance decisions.