194I: 10% land/building > ₹2.4L annual + 2% plant/machinery. 194IB: 5% individual > ₹50K monthly. Form 26QC + 16C. Penalties ₹200/day + interest 1.5%.
SECTION 194I TDS RATES (FY 2026-27): (1) LAND + BUILDING (residential or commercial): 10% TDS. Threshold: ₹2.4L annual rent. (2) PLANT + MACHINERY: 2% TDS. (3) FURNITURE separately if rented: 10%. APPLIES: when rent paid by SPECIFIED PERSONS (business, professionals, companies, firms). PROVIDE PAN: TDS at 10%. NO PAN: TDS at 20%. EXAMPLE: ₹3L annual rent for office. (a) TDS 10% × ₹3L = ₹30K. (b) Net paid to landlord ₹2.7L. (c) Landlord claims TDS credit in ITR.
SECTION 194IB = TDS by INDIVIDUALS or HUF (not in business) paying rent. APPLIES if MONTHLY RENT > ₹50,000. RATE: 5% (lower than 194I 10%). PERIODICITY: ANNUALLY (not monthly). NO TAN REQUIRED — use PAN. EXAMPLE: ₹60K monthly rent = ₹7.2L annual. (a) TDS 5% × ₹7.2L = ₹36K. (b) Pay TDS via Form 26QC by April 30 of next FY. (c) Give Form 16C to landlord. (d) Salaried + non-business individual TENANTS responsible. CRITICAL: salaried individuals with rent > ₹50K/month often miss this.
FORM 26QC (Section 194IB): (1) FILE annually within 30 days of FY end (April 30). (2) Online via NSDL portal. (3) Pay TDS amount. (4) Provide tenant PAN + landlord PAN. (5) Property address + period. (6) AUTO-generates Form 16C — DOWNLOAD + give to landlord. FORM 26Q (Section 194I): (1) For business/professional tenants. (2) Quarterly TDS return. (3) Form 16A issued to landlord quarterly. (4) Requires TAN registration. STRATEGIC: keep tenant + landlord PAN handy. Set April 30 reminder for Form 26QC.
PENALTIES FOR NON-COMPLIANCE: (1) LATE FILING: ₹200 per day fine up to TDS amount. (2) INTEREST: 1% per month for late TDS deduction. (3) INTEREST: 1.5% per month for late TDS deposit. (4) Section 234E + 271H penalty: ₹10K-1L. (5) Disallowance of rent expense in business (Section 40(a)(ia)). EXAMPLE: ₹50K TDS not paid, 6 months late: (a) Section 234E: 200 × 180 = ₹36K (cap at ₹50K). (b) Interest 1% × 6 × ₹50K = ₹3K. (c) Total ₹53K. STRATEGIC: file on time. Cost penalty far exceeds compliance effort.
TENANT STRATEGY: (1) BUSINESS: TAN registration + monthly TDS Section 194I. (2) INDIVIDUAL > ₹50K monthly: Form 26QC annually Section 194IB. (3) DOCUMENT rent agreement + landlord PAN. (4) RECEIPTS for HRA exemption + Section 80GG. LANDLORD STRATEGY: (1) PROVIDE PAN to tenant. (2) TDS credit in ITR. (3) FILE ITR + reconcile with Form 26AS. (4) RENTAL INCOME tax planning (Section 24(a) + 24(b)). (5) NRI LANDLORD: tenant deducts 30% TDS Section 195 (not 194I/IB). (6) TDS REFUND if landlord's tax < TDS deducted. (7) JOINT OWNERSHIP: each landlord gets PAN-wise TDS credit. CONSULT CA for high-rent + NRI complexities.