Recent TDS Changes for Rental Properties

Here's a clear summary of the recent TDS (Tax Deducted at Source) changes related to rental payments in India (as of April 2026):

Here's a clear summary of the recent TDS (Tax Deducted at Source) changes related to rental payments in India (as of April 2026):1. TDS on Rent by Individuals / HUFs (Section 194-IB)This is the most common "rental rule" for tenants who are salaried individuals or small HUFs (not liable for tax audit).

• Threshold: Monthly rent > ₹50,000 (no change).

• TDS Rate: 2% on the entire annual rent (not just the excess).

  • Previously it was 5% (before Oct 2024); reduced to 2% from Oct 1, 2024, and continues at 2%.

• When to deduct: Only once a year — from the March rent payment (or last month of tenancy if it ends earlier).

• Who deducts: The tenant (individual/HUF paying the rent).

• Deposit & Filing: Use Form 26QC (challan-cum-statement). Deposit TDS by 30th April after the financial year ends.

• Important for FY 2025-26 (ending 31 March 2026): If you're paying > ₹50,000/month, you must deduct 2% TDS from the March 2026 rent payment to avoid interest, penalties, and notices.

  hindustantimes.com

Example: Monthly rent ₹60,000 → Annual rent ₹7,20,000.

TDS = 2% of ₹7,20,000 = ₹14,400 (deducted from March rent). Tenant pays landlord net amount after TDS and deposits ₹14,400 to government.2. TDS on Rent by Businesses / Companies / Others (Section 194-I)

• Threshold: Now ₹50,000 per month (or ₹6 lakh per year) — updated in Budget 2025 (effective from FY 2025-26 / 1 April 2025). Previously it was ₹2.4 lakh per year.

  m.economictimes.com

• Rates:

  • 10% on rent for land, building, furniture/fittings.

  • 2% on rent for plant & machinery.

• TDS is deducted on the entire amount once the threshold is crossed in a month.

3. Major Change from 1 April 2026 (New Income Tax Act, 2025)

• All old TDS sections (including 194-I and 194-IB) are consolidated under Section 393 of the new Act.

• Rates and thresholds for rent remain largely the same.

• You must quote the new section/table references in returns filed for transactions after 1 April 2026.

• Transition rule: TDS for payments/credits up to 31 March 2026 follows old rules (1961 Act). From 1 April 2026 onwards, new rules apply.

  incometaxindia.gov.in

Key Compliance Tips (2026)

• High-rent tenants (above ₹50k/month): Don't miss deducting 2% TDS in March. Late deduction attracts interest + penalty up to ₹1 lakh or more.

• Landlord gets credit for the TDS in their ITR (via Form 26AS / AIS).

• No TDS if rent ≤ ₹50,000 per month.

• For NRIs landlords: Higher TDS rate (usually 30% + surcharge/cess) under Section 195 — no threshold.

• 
  

Note on "New Rental Rules 2026": Many viral posts about deposit caps (2 months), rent hike limits, registration, eviction rules etc. mostly refer to the Model Tenancy Act 2021, which states can adopt (not a uniform central law yet). These are not directly linked to the TDS changes. If your query is about a specific situation (e.g., your monthly rent amount, whether you're a tenant or landlord, or a particular state), provide more details for tailored advice. Always check the Income Tax e-filing portal or consult a tax professional for your case, as rules can have nuances.