What is rental income TDS threshold?

TDS (Tax Deducted at Source) on rental income is deducted by the tenant before paying rent to the landlord when the monthly rent exceeds a specified threshold. This ensures income tax is collected at source on rental income.

TDS Thresholds and Applicability

• Section 194I (Businesses and firms): TDS applicable when annual rent exceeds Rs 2,40,000 (i.e., Rs 20,000/month).
• Section 194IB (Individuals/HUFs non-audit cases): TDS applicable when monthly rent exceeds Rs 50,000.

TDS Rate Under Section 194IB

• 2% on rent paid for plant and machinery.
• 10% on rent paid for land, building, or furniture.

Who Must Deduct

Under Section 194IB, individual tenants (not subject to tax audit) paying rent exceeding Rs 50,000/month must deduct 5% TDS (revised to 2% from October 2024) in the last month of the financial year or when vacating, and deposit it using Form 26QC.

Many individual tenants are unaware of their TDS obligation under Section 194IB, leaving themselves exposed to penalties. If you are paying rent above Rs 50,000 per month, consult a CA to understand your TDS deduction and Form 26QC submission obligations and inform your landlord so they can claim the credit in their tax return.