TDS on Rent Under the Income-tax Act, 2025: Families, Businesses, and the Landlord Who Moved Abroad

Rent is where most people first meet TDS without meaning to. A family renting a flat in Bengaluru for ₹65,000 a month. A clinic renting a floor above a pharmacy. A company renting a godown. A tenant paying a landlord who now lives in Dubai.

All four have a TDS question, and under the Income-tax Act, 2025 the answers sit in one place, section 393. What matters is not what the property is, but who pays the rent, and where the landlord lives.

Two kinds of tenant

Section 393(1) has two rows for rent, and which one applies depends on whether the tenant is a "specified person" under section 402(37). That means:

• anyone who is not an individual or HUF: a company, a firm, an LLP, a trust; or
• an individual or HUF whose business turnover exceeded ₹1 crore, or professional receipts exceeded ₹50 lakh, in the preceding tax year.

Everyone else, which includes most families renting a home, is not a specified person.

A family or small tenant: serial 2(i), once a year

For an individual or HUF who is not a specified person, serial 2(i) applies when rent is more than ₹50,000 for a month or part of a month.

• Rate: 2%.
• Once, not monthly. Note 1 to the Table says the tax is deducted at the earlier of credit and payment, for the last month of the tax year or the last month of the tenancy.
• No TAN. Section 397(1)(c) excuses the tenant from getting one. The tax is paid with Form 141, the challan-cum-statement, within thirty days from the end of the month of deduction.
• No PAN from the landlord. The higher rate under section 397(2) applies, but section 397(2)(e) caps the deduction at the rent for the last month.

So a family paying ₹65,000 a month for the whole year deducts 2% of ₹7,80,000, which is ₹15,600, once, from the March rent.

A business tenant: serial 2(ii), every month

For a specified person, serial 2(ii) applies, with the same ₹50,000-a-month threshold:

• 2% for the use of machinery, plant or equipment;
• 10% for land, a building, a factory building, furniture or fittings.

This is deducted each time rent is credited or paid, and reported in the quarterly Form 140.

A landlord abroad

Rent paid to a non-resident landlord is outside both rows. It falls under section 393(2), Table serial 17, the successor to section 195: any sum chargeable under the Act paid to a non-resident, at the rates in force.

• There is no ₹50,000 threshold.
• The tenant needs a TAN, and reports the deduction in the quarterly Form 144.
• Sending the money abroad needs Form 145, and usually a chartered accountant's Form 146.

The landlord's residence changes everything. A tenant who has deducted 2% once a year for a landlord who moved abroad has been deducting under the wrong section.

Work out your own

Before the next rent cheque

• Decide which row applies: are you a specified person?
• Check whether the landlord is still resident. People move.
• Collect the landlord's PAN before the last month. Without it, the rate rises to 20%, capped at the last month's rent.
• If you are a family deducting under serial 2(i), diary the last month of the year, or of the tenancy if it ends earlier, and file Form 141 within thirty days.

Where this comes from

The law is section 393(1) (Table: Sl. No. 2 and Note 1), section 393(2) (Table: Sl. No. 17), section 397 and section 402(37) of the Income-tax Act, 2025 as amended by the Finance Act, 2026. The forms are under rules 219 and 220 of the Income-tax Rules, 2026. It applies from tax year 2026-27. Rent paid in 2025-26 was governed by sections 194-I, 194-IB and 195 of the 1961 Act.