Start with the rent period and the landlord's tax residence
This guide uses the Income-tax Act, 1961 for the historical examples in FY 2024–25 and FY 2025–26. The Income-tax Act, 2025 applies from 1 April 2026. Ordinarily, the earlier credit or payment determines the applicable regime; for the special individual/HUF rent provision, identify the prescribed last-month deduction event. Do not move a March 2026 withholding event into the new regime just because the statement or payment to government is made in April.
| Provision under the 1961 Act | When it applies | Threshold and rate | Ordinary reporting |
|---|---|---|---|
| Section 194-I | Rent to a resident, paid by a company, firm, LLP or other covered payer. An individual or HUF is covered when preceding-year business turnover or receipts exceeded ₹1 crore or professional receipts exceeded ₹50 lakh. Apply the statutory payer test rather than using tax-audit status as a substitute. | FY 2024–25: ₹2,40,000 per payee for the financial year. From 1 April 2025: ₹50,000 per payee for a month or part of a month. Above the applicable threshold, deduct on the relevant rent, not just the excess: 2% for plant, machinery or equipment; 10% for land, building, furniture or fittings. | Deduct at the earlier credit or payment. Obtain TAN; ordinarily use quarterly Form 26Q and issue Form 16A. |
| Section 194-IB | Individual or HUF outside the class specified in the second proviso to section 194-I, paying a resident for use of land or a building. | More than ₹50,000 per month or part. Rate 5% before 1 October 2024 and 2% from that date. Deduct on the applicable rent at the earlier credit/payment of rent for the last month of the financial year or tenancy, whichever month comes first. | No TAN for this section. Pay and report on Form 26QC within 30 days of the end of the deduction month. Issue Form 16C within 15 days of the due date of Form 26QC. |
| Section 195 | Payment to a non-resident of a sum chargeable under the Act. Verify tax residence; a foreign mailing address or NRO account does not establish it. | No general rent threshold. Use the applicable rates in force, including a relevant treaty position where established, and check any valid lower or nil deduction authorisation. Applicable surcharge and cess depend on the facts. | Ordinarily deduct at earlier credit/payment, use TAN and Form 27Q; consider Rule 37BB and Forms 15CA/15CB where required. Form 26QC is for a resident landlord. |
From 1 April 2026, section 393(1), table item 2(i), covers the special individual/HUF category; use Form 141 Schedule A under the 2026 rules. Ordinary resident rent is covered by table item 2(ii), which retains the ₹50,000 monthly threshold and 2%/10% split. For non-resident rent, consult the applicable provision in section 393(2), the rates in force and treaty, and use the prescribed non-resident reporting route. Quote the new table item where applicable rather than the old section number.
How to identify and measure rent
- Substance and co-owners. A lease, sublease or other arrangement may be rent even if the immediate payee is not the owner. Where several resident payees have definite, ascertainable shares, test rent separately for each; CBDT Circular 715, question 21, illustrates that principle under section 194-I using the historical limit then in force. In FY 2024–25, ₹4,40,000 paid equally to two such co-owners is ₹2,20,000 each and does not cross that year's ₹2,40,000 limit. Under section 194-IB, separate ₹40,000 shares of ₹80,000 monthly do not cross ₹50,000; separate ₹60,000 shares of ₹1,20,000 do. Report separately by landlord where required and retain evidence of actual entitlement and payment.
- Separate bases, one payee. Aggregate rent for the relevant period payable to the same payee when testing section 194-I. Apply 10% to the building or furniture portion and 2% to separately supportable equipment rent. An independent maintenance contract for work may instead come under section 194C, subject to its thresholds and payee rate. Maintenance embedded in an indivisible rent charge generally follows the rent; a separate line on an invoice alone does not settle classification.
- GST and deposits. When GST on services payable to a resident is separately indicated under the agreement, exclude that component from the TDS base under CBDT Circular 23/2017. On monthly rent of ₹1,00,000 plus ₹18,000 GST, the invoice is ₹1,18,000 and building rent TDS is ₹10,000 where due. A genuinely refundable deposit not applied to rent is not rent; a deposit applied against future rent is advance rent. Check the lease and actual liability for reimbursements. There is no blanket exclusion for electricity, water or property tax merely because it is separately billed.
- Special payee cases. Check the section 194-I exclusion for rent paid to a business trust that is a REIT in respect of its directly owned real estate asset and section 10(23FCA). A valid section 197 certificate may change deduction under sections such as 194-I or 195; do not treat section 197 as a general route for section 194-IB under the 1961 Act.
Year-end rent withholding and the no-PAN ceiling
At ₹60,000 a month for 12 months with the last-month event after the 2024 rate change, total rent is ₹7,20,000, TDS is ₹14,400 and the last month's net rent is ₹45,600. If the tenancy ends in November after eight months, the ₹4,80,000 rent produces ₹9,600 TDS, and a November deduction is reported by 30 December. For section 194-IB, the rate change is applied at the statutory deduction event; check whether payment or credit of the last month's rent occurred earlier.
If section 206AA applies because the landlord has not furnished a valid PAN, 20% of ₹7,20,000 is ₹1,44,000, but section 194-IB(4) caps the deduction at the ₹60,000 rent payable for the last month in this example. An inoperative PAN requires separate checking of the relevant rules and CBDT relief for the period. Obtain and validate the landlord's PAN early. The statutory ceiling does not resolve the filing problem if the Form 26QC service cannot accept missing landlord identification; seek department assistance promptly rather than entering a false identifier or assuming the reporting duty disappears.
GST decision table for property rent
| Property and parties | Ordinary GST treatment |
|---|---|
| Commercial property, registered landlord under the normal scheme | Generally taxable at 18% under forward charge; check exemptions and the supplier's actual scheme. |
| Property other than a residential dwelling, unregistered landlord and regular registered recipient | Entry 5AB under Notification 13/2017 as amended by 09/2024 applies from 10 October 2024. The registered recipient pays reverse charge, ordinarily at 18% on a commercial letting. |
| Same property and unregistered landlord, but recipient opted for composition | Notification 07/2025 excludes this recipient from entry 5AB from 16 January 2025. Circular 245/02/2025-GST regularises the 10 October 2024 to 15 January 2025 interval on an as-is-where-is basis. This is not a general exemption for a composition taxpayer's other transactions. |
| Residential dwelling for use as a residence, unregistered tenant | Ordinarily exempt under entry 12 of Notification 12/2017. Verify the residential use and whether any other provision applies. |
| Residential dwelling rented to a GST-registered person | Ordinarily reverse charge under entry 5AA, added by Notification 05/2022 from 18 July 2022. Notification 04/2022 made the companion exemption change. From 1 January 2023, a registered proprietor who rents in a personal capacity for their own residence, on their own account and not that of the proprietorship, qualifies for the specific residential exemption under Notification 15/2022. |
Reverse charge is paid in cash; do not use input credit to discharge it. Where required, issue a self-invoice for supplies from an unregistered supplier and retain payment and return evidence. A regular taxpayer can claim eligible input tax credit only when the applicable requirements are met, including business use and any restrictions under section 17. Rent for a guest house or employee residence does not automatically qualify.
Six worked examples
1. ₹65,000 monthly home rent in FY 2024–25
Karthik, a salaried and unregistered tenant, rents his family's home from a resident for April 2024 to March 2025. Assume the statutory last-month event occurs in March, with no earlier advance of March rent. Rent totals ₹7,80,000; section 194-IB at 2% gives ₹15,600, leaving ₹49,400 payable to the landlord in March. Form 26QC is due 30 April 2025 and Form 16C by 15 May 2025. The residential use is exempt from GST on these facts.
2. ₹80,000 rent and a landlord who will not furnish PAN
Priya rents from April 2025 to January 2026 (10 months), paying total rent of ₹8,00,000. With PAN, TDS at 2% would be ₹16,000. At 20% it is ₹1,60,000 before the statutory cap, but the January rent caps it at ₹80,000; the net last-month payment is nil. For a January deduction, Form 26QC is due 2 March 2026. Seek portal assistance if the required landlord PAN is unavailable.
3. A ₹38,000 office jointly owned by two residents
In FY 2025–26 a regular GST-registered company leases a Bengaluru office from two genuinely unregistered co-owners with separately established 50% shares. Annual rent is ₹4,56,000; each owner receives ₹19,000 monthly or ₹2,28,000 annually. Neither monthly amount crosses the section 194-I limit. For an intra-State supply, the company pays ₹6,840 GST under entry 5AB (₹3,420 CGST plus ₹3,420 SGST) each month, with input credit subject to the ordinary conditions. The landlord's registration status and the tenant's income-tax obligation are separate questions.
4. Building, equipment and independently contracted maintenance
Assume a FY 2025–26 company lease with building and equipment rent payable to the same resident landlord, and a separate regular service contract with a resident facilities company. The rent payable to the landlord in each month exceeds ₹50,000 in aggregate. The service contract totals ₹3,60,000 over 12 months, above the ₹1,00,000 annual section 194C threshold even though each service payment is ₹30,000. GST is separately stated.
| Monthly payment | Base | Invoice with 18% GST | TDS | Net payment |
|---|---|---|---|---|
| Building | ₹2,00,000 | ₹2,36,000 | ₹20,000 at 10% | ₹2,16,000 |
| Equipment | ₹50,000 | ₹59,000 | ₹1,000 at 2% | ₹58,000 |
| Maintenance services | ₹30,000 | ₹35,400 | ₹600 at 2% | ₹34,800 |
5. ₹35,000 rent paid to a non-resident landlord in Dubai
Arjun's landlord is assumed non-resident for FY 2025–26. The section 194-IB threshold is irrelevant to the chargeable rent from the Mumbai property. If the applicable domestic withholding rate for this individual is 30%, plus 4% cess on the tax, with no surcharge or applicable lower rate, the effective rate is 31.2%. TDS is ₹10,920 and net rent ₹24,080. Check treaty eligibility and any lower-deduction certificate before treating this example as the applicable rate. Report under the section 195 route. Under the usual non-government TAN rules, the deposit is normally due by the 7th of the following month, with the separate 30 April deadline for a March deduction.
6. Company transit guest house
A regular GST-registered company takes a Delhi residential flat from a resident in FY 2025–26 at ₹90,000 per month (₹10,80,000 annually). It deducts ₹9,000 per month under section 194-I and pays the landlord ₹81,000. Separately it pays ₹16,200 GST at 18% under entry 5AA, assuming the normal rental rate applies. GST paid directly to the government by the tenant is not part of the rent paid to the landlord. Review credit eligibility separately.
Interest, fees and practical questions
For historical withholding under the 1961 Act, section 201(1A) generally charges 1% per month or part from when tax was deductible to deduction, and 1.5% per month or part from deduction to payment if remittance is late. Section 234E charges ₹200 per day of statement delay, capped at the tax deductible. Section 271H provides for a ₹10,000 to ₹1,00,000 penalty for relevant defaults; the statutory late-filing exception requires payment of tax, interest and fee and filing within the allowed period, shortened to one month from 1 April 2025. It does not excuse incorrect statements. Failure to issue a TDS certificate can separately attract section 272A(2)(g), ordinarily ₹500 per day capped at the tax deductible. In business computation, check section 40(a)(ia) for covered resident payments (30% disallowance where applicable) or section 40(a)(i) for covered non-resident payments, including the statutory cures. These are distinct from the payer's withholding interest.
- Exactly ₹50,000 or a short tenancy? Exactly ₹50,000 does not exceed the section 194-IB threshold. A June 2025 to March 2026 tenancy at ₹55,000 per month is ₹5,50,000 and produces ₹11,000 TDS. Two months at ₹60,000 produce ₹1,20,000 rent and ₹2,400 TDS. There is no separate ₹6,00,000 annual threshold.
- Occasional hotel bills or a room allotment? A ₹3,00,000 aggregate of ordinary trips is not automatically rent. A contract obliging a hotel to make earmarked accommodation available regularly can be rent; a mere corporate rate arrangement without that obligation is different. Test the threshold applicable to the payment period and actual payee.
- Form 15G or 15H? Under the historical Act, an eligible resident can furnish the applicable declaration for section 194-I subject to section 197A and the prescribed conditions. Form 15H is for a qualifying resident individual aged at least 60 with nil estimated tax; Form 15G has separate eligibility and income limits. The historical declarations do not generally switch off section 194-IB or section 195 withholding.
Sources
- Income-tax Act, 1961 as amended: sections 194-I, 194-IB, 195, 197, 197A, 201, 206AA, 234E and 271H
- Finance Act, 2025: section 64 and First Schedule
- Finance (No. 2) Act, 2024: section 194-IB rate and section 271H amendments
- CBDT Circular 715: ascertainable co-owner shares, deposits and regular hotel accommodation
- CBDT Circular 23/2017: GST on services separately indicated for a resident payee
- Income Tax Department guide: Form 26QC, Form 16C and the deduction ceiling
- Income-tax Act, 2025: section 393 rent withholding table
- Income Tax Department: withholding transition
- Income Tax Department: Form 141 Schedule A
- GST Notification 05/2022: residential dwelling reverse charge entry 5AA
- GST Notification 15/2022: proprietor’s own residence
- GST Notification 09/2024: commercial property reverse charge entry 5AB
- GST Notification 07/2025: composition recipient exclusion
- CBIC Circular 245/02/2025-GST: composition-recipient transition