TDS on Rent under Section 194I and 194IB: A Tenant Guide for Hyderabad

Published on: 14 April 2026 at 9:24 PM IST

TDS on rent: what Hyderabad clients should know

Before we dig in: TDS on rent is the thread running through this guide. Keep it in mind as each section unfolds.

TDS on rent under Sections 194I and 194IB trips up many Hyderabad tenants and landlords each year.

Tenants often assume that TDS on rent is something only the landlord needs to worry about. That is not quite right. In addition, under Sections 194I and 194IB of the Income tax Act, it is the tenant, not the landlord, who must deduct TDS at source when rent crosses specified thresholds. Failing to do so creates liabilities and disallowances that land squarely on the tenant. Moreover, this guide explains how TDS on rent works for tenants in Hyderabad, with a focus on the practical mechanics.

Two Sections, Two Situations

In addition, tDS on rent is governed by two different provisions. Section 194I applies when the tenant is a business entity (company, partnership firm, LLP, or an individual or HUF whose turnover or gross receipts in the preceding financial year exceeded the monetary limits prescribed for tax audit). Furthermore, section 194IB applies to individuals or HUFs who are not covered by tax audit and who pay rent above the prescribed monthly threshold. Businesses and salaried individuals above certain rent thresholds therefore follow different paths. Also, and it is important to know which one applies to your situation.

Section 194I: For Business and Audit Tenants

Moreover, under Section 194I, TDS deduct when the total rent paid or payable in a financial year exceeds the prescribed annual threshold. The rate of deduction depends on the nature of the asset rented: land, building, or furniture attracts a lower rate. However, while plant, machinery,. Equipment attract a different rate. Therefore, tDS is deducted at the time of credit or payment, whichever is earlier. And is deposited with the government by the 7th of the following month (the 30th of April for the March quarter end credit entries). As a result, the tenant also files quarterly TDS returns in Form 26Q and issues Form 16A to the landlord.

Section 194IB: For Individual and HUF Tenants

Furthermore, section 194IB was introduced to bring residential and small commercial leases paid by individuals and HUFs (not covered by tax audit) into the TDS net. Where rent to a resident landlord exceeds the prescribed monthly threshold, TDS is deducted at the prescribed rate on the last month of the tenancy or the last month of the financial year, whichever is earlier. For example, unlike Section 194I, this deduction does not require a TAN. the tenant uses their PAN and files a single statement cum challan in Form 26QC within 30 days of the end of the month in. The deduction is made.

How to File Form 26QC Step by Step

Form 26QC is filed on the TIN NSDL portal. The tenant enters the landlord’s PAN and address, the rental period, the total rent paid, the TDS amount. The payment details. On top of that, on successful filing, a challan cum statement is generated and tax can be paid online through net banking or debit card. The tenant then issues Form 16C to the landlord within 15 days of filing Form 26QC. Most importantly, form 16C is the tenant’s proof to the landlord that tax was deducted and deposited.

Getting the Landlord PAN

Also, a very common tenant side issue is the landlord refusing or being slow to share PAN. This is not optional. Importantly. PAN is not furnished, the tenant must deduct TDS at the higher rate prescribed under Section 206AA (typically 20 percent). And the landlord loses credit for the TDS until PAN is updated. Consequently, corrected statements are filed. The cleanest approach is to capture PAN in the rental agreement itself.

What Happens If You Miss Deducting

If TDS is not deducted when it ought to have been, the tenant faces disallowance of the expense while computing income (under Section 40(a)(ia) for business tenants), interest at the prescribed rate for late deduction. Late deposit, and in extreme cases prosecution. In short, for individual tenants under 194IB, the same interest and penalty framework applies. The fix is always to deduct and deposit promptly once the error is identified. Meanwhile, and to retain the trail of corrected challans and statements.

Special Situations to Watch

However, several situations raise practical questions. Rent paid to a non resident landlord follows Section 195 rather than 194I or 194IB, usually at the rate applicable under the tax treaty. Besides, maintenance charges paid separately to a society may not be rent in the strict sense but will often still be covered depending on the agreement. Advance rent paid for multiple years requires deduction on the entire amount at the time of credit. Similarly, rent of furnished premises with a composite lease has a bifurcation question between different rates under 194I. Each of these is worth a two minute conversation with your accountant before the cheque goes out.

Record Keeping for Tenants

Therefore, maintain copies of the rental agreement, all rent payment vouchers, Form 16C issued to the landlord (or received from the tenant if you are the landlord),. Proof of tax deposit (challans). Likewise, these records should be retained for at least six years. A simple monthly folder is enough. the key is to have everything in one place when the assessment officer asks for it.

When to Bring In Professional Support

As a result, for a salaried individual paying rent just above the 194IB threshold, the annual filing is manageable with a careful read of the rules. For businesses that have multiple premises, mixed residential and commercial leases, or non resident landlords, professional support is usually worth it. In addition, the cost of getting TDS wrong is significantly higher than the cost of getting it done properly.

Need Help with This

Sunshine Accountancy and Co. was supporting Indian businesses since 1994 with accounting, bookkeeping, GST, income tax, payroll, and audit work. Moreover, call +91 9676313137 or write to hello@sunshineaccountancy.com for a confidential consultation.

Related Reading

For the most up-to-date rules on TDS on rent, see the Income Tax Department portal. Sunshine Accountancy and Co. helps Hyderabad clients with TDS on rent end to end — paperwork, filings, and follow-ups.

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