Moment guide · FY 2026-27

I am paying rent from my business

What TDS applies to rent paid by a business?

Businesses deduct 10% TDS on land/building rent and 2% on plant and machinery rent under section 194I when annual rent exceeds ₹2.4 lakh, excluding the GST component. Individuals and HUFs not subject to audit deduct 5% under section 194IB when monthly rent exceeds ₹50,000, filing Form 26QC. Missing the TDS disallows the rent under section 40(a)(ia).

The #1 trap

Deducting TDS on the GST component of rent — TDS is computed on the rent excluding GST. Also, individuals paying rent above ₹50,000 a month often miss that they too must deduct 5% TDS under 194IB and file Form 26QC, even though they are not subject to audit; failing that, the rent is disallowed in their hands under section 40(a)(ia).

Sonia, boutique owner renting a shop and an apartment for staff

Sonia's boutique pays ₹40,000 a month, which is ₹4,80,000 a year, for its shop, plus GST on the rent. Under section 194I, since the annual rent exceeds ₹2,40,000, she deducts 10% TDS on the rent EXCLUDING the GST component. If the monthly rent is ₹40,000 plus ₹7,200 GST, the TDS base is ₹40,000, giving monthly TDS of ₹4,000, not ₹4,720. The TDS is deposited by the 7th of the next month and reported in Form 26Q, and the landlord's credit appears in Form 26AS. Sonia also pays ₹55,000 a month for a flat she has taken for visiting staff, which is ₹6,60,000 a year. As an individual not subject to audit, she deducts 5% TDS under section 194IB on the annual rent of ₹6,60,000, which is ₹33,000, pays it once a year and files Form 26QC within 30 days of the end of the financial year. If she had forgotten the 194IB TDS, the entire ₹6,60,000 rent would be disallowed in her business computation under section 40(a)(ia), converting a small TDS slip into a large tax bill. Her friend renting plant and machinery for a packaging line pays 2% TDS on that rent under section 194I instead of 10%, because the rate depends on the asset. Sonia maintains a TDS calendar for the monthly 194I deductions and the annual 194IB payment. A quick call with us dials in the final figure. Sonia also notes that the ₹2,40,000 threshold for 194I is tested on the rent payable in a year, so a monthly rent of ₹20,000, which is ₹2,40,000 a year, sits exactly at the line and attracts TDS from the first payment of the year. The TDS is deducted on the rent exclusive of GST, and if the lease splits the rent into land and building versus plant and machinery components, the two rates apply separately to each component. For a lease of a building with furniture, the 10% rate applies to the building portion, and the furniture is treated as part of the building rent unless separately valued. If the landlord is a non-resident, section 195 applies instead of 194I, with different rates and forms. The TDS is deposited by the 7th of the month following the deduction, and the quarterly return Form 26Q reports it, with the landlord's credit flowing to Form 26AS. A quick call with us dials in the final figure.