New Changes For TDS on Rent in Income Tax Act 2025

New Changes For TDS on Rent in Income Tax Act 2025

Under the new tax framework, the provisions for TDS on Rent have been consolidated under Section 393(1). The rules differ depending on whether the tenant is an ordinary individual or a business entity.

1.TDS on Rent ; For Individuals & HUFs (Non-Business Cases)

This applies to salaried employees or other individuals paying rent for their residence who are not liable for a tax audit.

• When to Deduct: You must deduct TDS only if the rent exceeds ₹ 50,000 per month or part of a month.
• TDS Rate: 2%.
• When to Deduct (Timing): You do not need to deduct tax every month. It is a one-time deduction:
  • At the time of credit/payment for the last month of the tax year (March); or
  • At the time of credit/payment for the last month of tenancy (if you vacate the property during the year).
• How to Pay:
  • You must file Form No. 141 (Challan-cum-statement).
  • Deadline: The tax must be deposited within 30 days from the end of the month in which the deduction is made,.
  • Note: You do not need a TAN (Tax Deduction Account Number) for this. You can use your PAN.

2.TDS on Rent ; For Businesses (“Specified Persons”)

This applies to companies, firms, and individuals whose accounts are audited.

• Threshold Limit: TDS applies if the aggregate rent paid exceeds ₹ 50,000 per month or part of a month.
• TDS Rates:
  • 2% for the use of Machinery, Plant, or Equipment.
  • 10% for the use of Land, Building (including factory), Furniture, or Fittings.
• Compliance:
  • Payment Deadline: Generally by the 7th of the next month (for March, by 30th April).
  • Return Form: File quarterly statement in Form No. 140.

3. Important Safeguards & Rules

• No PAN Penalty: If the landlord does not provide a PAN, the TDS rate increases to 20%. However, for Individuals/HUFs (Case 1 above), the deduction amount cannot exceed the rent payable for the last month. This protects the tenant from paying more tax than the rent due,.
• How Landlords Can Avoid TDS:
  • Landlords can submit Form No. 121 (which replaces Forms 15G/15H) to the tenant to receive rent without TDS.
  • Condition: The landlord’s total income must be below the taxable limit, or (for Senior Citizens) the final tax liability must be Nil,.

Summary Table

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