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TDS on Rent

Category
Rates & sections
Answered by
CA Tirumalesh Malla
Question from Sailaja
I am paying Rs. 60000 per month rent for my office, i am an individual proprietorship, do i need to deduct TDS to the owner if yes can you tell me how much i need to deduct every month, do i need to have a TAN for making payment of TDS

Answer

Yes — at ₹60,000 a month your office rent is above the ₹50,000-per-month threshold, so TDS has to be deducted. Which section applies, the rate, and whether you need a TAN all turn on one point: whether your proprietorship was liable to a tax audit under Section 44AB in the previous financial year.

If you are NOT liable to tax audit (the usual case for a small proprietor): Section 194-IB applies and the rate is 2% (reduced from 5% with effect from 1 October 2024). Importantly, this is not a monthly deduction — under 194-IB you deduct only once in the year, in the last month of the financial year (March), or in the last month of the tenancy if you vacate earlier, on the whole year's rent. For a full year at ₹60,000 that works out to 2% of ₹7,20,000 = ₹14,400, deducted once (the year's TDS cannot exceed one month's rent).

For 194-IB you do not need a TAN. You deposit the tax using your PAN and the landlord's PAN through Form 26QC (a challan-cum-statement) within 30 days from the end of the month in which you deduct, and then issue Form 16C to the landlord.

If you ARE liable to tax audit (turnover/receipts crossed the 44AB limit last year): Section 194-I applies instead. Here you deduct at 10% on building rent every month at the time of payment or credit — that is ₹6,000 a month on ₹60,000. In this case you do need a TAN, you deposit the TDS by the 7th of the next month, file a quarterly return (Form 26Q, now Form 140), and issue Form 16A.

Two points apply either way. First, get the landlord's PAN — if a valid PAN is not provided, TDS is deducted at 20% (under 194-IB this is capped at the last month's rent). Second, deduct on the rent excluding GST, where GST is charged separately.

In short: at ₹60,000 a month you must deduct. If you are not under tax audit it is 2% once a year under Section 194-IB with no TAN; if you are under tax audit it is 10% every month under Section 194-I with a TAN.

This is general information based on the law for FY 2026-27 and not advice on your specific situation. Please confirm your tax-audit position before deducting — or reply with that detail and we'll point you to the exact route.

Answered by CA Tirumalesh Malla. General information for FY 2026-27 under the Income-tax Act 2025, not advice on your specific case.