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Rent TDS — 194-I or 194-IB?

One monthly rent figure, two very different TDS regimes. Route the payment to the right section, compute the deduction at FY 2026-27 rates, and get the exact Form 26QC / 26Q calendar — including the no-PAN 20% rule and the 194-IB last-month cap.

Who is paying, and for what?
Payer type
What is rented
Monthly rent (₹)
Threshold for both sections: rent exceeding ₹50,000 for a month (or part of a month) — the old ₹2.4 lakh annual test under 194-I was replaced by FA 2025.
Months of rent in the year
Landlord PAN available?
No PAN → 20% under Sec 397(2), IT Act 2025 (old 206AA)
Applicable section
Section 194-IB
Deduct once — last month of the year or of the tenancy — file Form 26QC, no TAN needed. From 1 Apr 2026 the operative law is Sec 393, Income Tax Act 2025 (old label retained in practice).
Computation
Monthly threshold (> ₹50,000/month) crossed?✓ Yes — TDS applies
Rate2% — flat rate under 194-IB
Annual rent₹7,20,000
TDS for the year₹14,400
194-IB mechanics
Deduct once a year
In the last month of the financial year (March) — or the last month of tenancy if you vacate mid-year — on the whole year's rent.
Form 26QC in 30 days
The challan-cum-statement is due within 30 days from the end of the month of deduction (March deduction → 30 April). Late filing: ₹200/day u/s 234E, capped at the TDS.
Form 16C in 15 days
Issue the TDS certificate to the landlord within 15 days of filing Form 26QC (₹500/day for delay).
No TAN needed
The tenant quotes their own PAN and the landlord's PAN — 194-IB was built so salaried tenants never need a TAN.
Why this matters in audit

Expense disallowance under 40(a)(ia), interest under 201(1A), and a late-fee trail — all from one wrong section.

A tenant deducting 10% under 194-I when 194-IB applied (or vice versa) files the wrong form against the wrong section code — mismatches surface in TRACES, 26AS and the tax audit's clause 34 reporting. CORAA's ledger scans flag rent heads where the deduction pattern doesn't match the payer's audit status.

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Buying property instead of renting? Run the 194-IA property purchase TDS calculator — 1% on the higher of consideration and stamp duty value.

How rent TDS routing works

Two provisions govern TDS on rent. Section 194-I applies to every payer other than an individual or HUF not liable to tax audit — companies, firms, LLPs, trusts, and audited individuals/HUFs. The rate is 10% for land, building or furniture and 2% for plant, machinery or equipment. Section 194-IB covers the remaining tenants — individuals and HUFs not liable to tax audit — at a flat 2% (reduced from 5% with effect from 1 October 2024), but only for rent of land or building.

Finance Act 2025 aligned the thresholds: from 1 April 2025, no deduction is required under 194-I where the rent for a month (or part of a month) does not exceed ₹50,000 — replacing the old ₹2,40,000 annual test (₹50,000 × 12 = ₹6 lakh a year, but the test is applied month by month, not annually). 194-IB has always used the same ₹50,000-per-month benchmark.

Mechanics differ sharply. 194-I is the classic regime — deduct monthly, deposit by the 7th of the next month through a TAN, file quarterly Form 26Q, issue Form 16A. 194-IB was designed for tenants without TDS infrastructure — deduct only once, in the last month of the financial year or the last month of tenancy if vacating earlier, file challan-cum-statement Form 26QC within 30 days from the end of that month, and issue Form 16C within 15 days of filing. No TAN is required. From 1 April 2026, both old sections operate as part of Sec 393 of the Income Tax Act 2025, with the no-PAN higher rate in Sec 397(2).

Worked example — salaried tenant at ₹60,000/month

A salaried individual (no tax audit) pays ₹60,000 per month for a flat, occupied for the full year. Landlord has PAN.

Inputs
PayerIndividual, not liable to audit → 194-IB
Monthly rent₹60,000 (> ₹50,000 — TDS applies)
Annual rent₹7,20,000
Rate2%
Output
TDS — deducted once in March₹14,400
Rent paid for March₹45,600 net of TDS
Form 26QC due30 April
Form 16C due15 days after filing 26QC
The tenant deducts 2% of the full year's rent (₹7.2 lakh × 2% = ₹14,400) from the March rent, files Form 26QC by 30 April quoting both PANs, and issues Form 16C to the landlord. Had the landlord not furnished PAN, the rate would be 20% (₹1,44,000) — but 194-IB caps the deduction at the last month's rent of ₹60,000.

Common mistakes

Testing the threshold annually instead of monthly
Since FA 2025 the 194-I test is per month or part of a month. Eleven months at ₹49,000 needs no deduction even though the year totals ₹5.39 lakh; a single month at ₹51,000 does. The old ₹2.4 lakh annual logic baked into templates and software gives wrong answers for FY 2025-26 onwards.
Audited individuals using 194-IB
An individual or HUF whose accounts were liable to audit u/s 44AB falls under 194-I, not 194-IB — monthly deduction, TAN, Form 26Q. Proprietors who crossed the audit threshold often keep deducting once a year under 26QC out of habit.
One rate for a composite rent invoice
Under 194-I, land/building attracts 10% but plant & machinery only 2%. A composite invoice (office + equipment) deducted entirely at 10% over-deducts; entirely at 2% under-deducts and invites 201(1A) interest plus 40(a)(ia) disallowance exposure.
Forgetting the 194-IB no-PAN cap
Without landlord PAN the rate jumps to 20% — but Section 194-IB(4) caps the total deduction at the rent payable for the last month. Tenants who mechanically deduct 20% of annual rent recover more than the law allows.
NRI landlord routed through 194-IB
If the landlord is a non-resident, neither 194-I nor 194-IB applies — Section 195 does, at the rates in force (typically 30%-plus with cess for rental income), with TAN and quarterly Form 27Q. The ₹50,000 threshold gives no shelter under 195.

Frequently asked questions

What is the TDS rate on rent for FY 2026-27?+
Under the old-194-I head (payers other than non-audited individuals/HUFs): 10% for land, building or furniture and 2% for plant & machinery, where rent exceeds ₹50,000 for a month or part of a month. Non-audited individuals and HUFs deduct 2% under the old-194-IB route above the same monthly threshold. Operative law from 1 Apr 2026: Sec 393, Income Tax Act 2025.
Did the 194-I threshold really change from ₹2.4 lakh to ₹6 lakh?+
Finance Act 2025 replaced the ₹2,40,000-per-year threshold with ₹50,000 per month (or part of a month) from 1 April 2025 — often described as a ₹6 lakh annual limit, but the statutory test is monthly. A tenancy of three months at ₹60,000 attracts TDS even though the annual total (₹1.8 lakh) is below ₹6 lakh.
When does a tenant deduct TDS under Section 194-IB?+
Once a year only — at the time of credit or payment of the rent for the last month of the financial year, or the last month of tenancy if the property is vacated earlier. The 2% is applied to the entire rent paid or credited for the year (or tenancy period).
What is Form 26QC and when is it due?+
Form 26QC is the challan-cum-statement for 194-IB TDS — filed online within 30 days from the end of the month in which tax was deducted. A March deduction means a 30 April deadline. Late filing attracts a fee of ₹200 per day under Section 234E, capped at the TDS amount.
Does a tenant need a TAN to deduct rent TDS?+
Not under 194-IB — the tenant quotes their own PAN and the landlord's PAN in Form 26QC, and issues Form 16C within 15 days of filing. Under 194-I, a TAN is mandatory, with monthly deposits and quarterly Form 26Q returns.
What if the landlord does not furnish PAN?+
Deduct at 20% (or the higher applicable rate) under Sec 397(2) of the Income Tax Act 2025 — the old Section 206AA rule. Under 194-IB specifically, the total deduction is capped at the rent payable for the last month, so the tenant never hands over more than one month's rent as TDS.
Which section applies if I pay rent for machinery as a non-audited individual?+
194-IB covers only land or building (or both). Rent for plant, machinery or equipment paid by an individual/HUF not liable to audit falls outside both sections — no TDS obligation arises under either head, though 194-I applies the moment the payer becomes liable to audit.

Authoritative sources

Sections 194-I & 194-IB, Income-tax Act 1961 (Sec 393, Income Tax Act 2025) + Rule 30/31, Form 26QC — Thresholds verified 29 July 2026: ₹50,000/month for both sections per Finance Act 2025 (effective 1 Apr 2025); 194-IB rate 2% since 1 Oct 2024. Refresh after every Finance Act.
Always confirm against the latest version of the source. Regulations evolve and amendments are common.
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Last reviewed: 2026-07-29 · For informational purposes only — not professional advice.