TDS on rent: what a tenant must deduct for an NRI vs an Indian landlord
The tax you deduct on house rent depends entirely on one thing — whether your landlord is a resident Indian or an NRI. Get it wrong with an NRI landlord and you, the tenant, are personally liable. Here's the full picture for FY 2025-26 / 2026-27.
The one fact that decides everything
TDS on rent is not about your status as the tenant — it's about who you are paying. Ask one question before you sign the lease: is the owner a resident of India, or an NRI for tax purposes?
| Resident Indian landlord | NRI landlord |
|---|
| Governing section | 194-IB / 194-I | Section 195 |
| Threshold below which no TDS | ₹50,000 / month | None — TDS from rupee one |
| TDS rate | 2% (individual) / 10% (business) | ~31.2% and up |
| TAN needed? | No (194-IB) | Yes |
| How often | Once a year (194-IB) | Every month |
| Form / certificate | Form 26QC → 16C | Form 27Q → 16A |
Case 1 — your landlord is a resident Indian
A) You're an ordinary individual tenant → Section 194-IB
- Applies only if rent exceeds ₹50,000 per month. Below that, there is no TDS at all — and most ordinary residential tenancies fall here.
- Rate: 2% (reduced from 5% with effect from 1 October 2024).
- Deduct it once a year — in the last month of the tenancy or the last month of the financial year (March).
- No TAN required. Use your PAN and the landlord's PAN.
- File Form 26QC within 30 days of that month and give the landlord a Form 16C.
- If the landlord gives no PAN, the rate rises to 20% (capped at the last month's rent).
Example: Rent ₹80,000 × 12 = ₹9,60,000. TDS = 2% = ₹19,200, deducted from the final month's payment.
B) You're a business / company / individual under tax audit → Section 194-I
- Rate: 10% on land/building (2% on plant & machinery).
- Threshold (FY 2025-26 onward): ₹50,000 per month — raised in Budget 2025 from the old ₹2,40,000 per year.
- TAN required; file Form 26Q quarterly.
Case 2 — your landlord is an NRI (Section 195)
This is where tenants most often go wrong — the rules are far stricter and you, the tenant, are personally liable if you get it wrong.
- No threshold whatsoever. Even ₹15,000/month rent needs TDS. The ₹50,000 exemption does not apply.
- Rate: 30% base + surcharge (if any) + 4% Health & Education Cess.
- You must obtain a TAN before deducting (Form 49B). PAN alone is not enough.
- Deduct every month at the time of payment; deposit by the 7th of the next month.
- File Form 27Q quarterly and issue the NRI a Form 16A. Credit rent ideally to the landlord's NRO account.
| Annual rent | Surcharge | Effective TDS rate |
|---|
| Up to ₹50 lakh | Nil | 31.2% |
| ₹50 lakh – ₹1 crore | 10% | 34.32% |
| ₹1 crore – ₹2 crore | 15% | 35.88% |
Example: Rent ₹60,000/month to an NRI. TDS = 31.2% = ₹18,720 deducted every month. You pay the landlord ₹41,280 and deposit ₹18,720.
The relief valve: lower / nil deduction certificate (Section 197)
31.2% is usually far more than the NRI's actual tax (after the 30% standard deduction on house property). So the NRI can apply to the Income Tax Department for a lower-deduction certificate under Section 197. If they hold one (say it certifies 5%), you deduct at that lower rate instead. Always ask an NRI landlord whether they have a Section 197 certificate.
Why this matters so much with an NRI landlord
If you pay an NRI landlord without deducting TDS — because you assumed the ₹50,000 rule applied, or didn't know they were an NRI:
- You become the "assessee in default" — the tax department recovers the unpaid TDS from you, not the landlord.
- Plus interest (1%–1.5% per month) and a penalty that can equal the TDS amount.
- If you're a business, the rent expense can also be disallowed.
🛡️ Safeguard: Before signing, get a written declaration of the landlord's residential status and PAN. If there's any sign they live abroad, get a TAN and treat it as Section 195. "I didn't know they were an NRI" is not a valid defence.
Quick tenant checklist
- Confirm the landlord's residential status in writing (resident or NRI) before you sign — and collect their PAN.
- NRI landlord? Apply for a TAN, deduct 31.2% (or per their Section 197 certificate) on every rent payment, regardless of amount.
- Resident landlord, you're an individual, rent over ₹50,000/month? Deduct 2% once a year, file Form 26QC, give Form 16C. No TAN needed.
- Resident landlord, rent ₹50,000/month or less, you're an individual? No TDS.
- You're a business/company? Section 194-I: 10%, ₹50,000/month threshold, TAN + Form 26Q.
- Deposit on time and hand the landlord their TDS certificate — they need it to claim credit.
Renting in Mumbai — as a tenant, owner or NRI?
Our team handles leasing end-to-end: the right property, lease drafting, and pointing you to the correct TDS, stamp duty and registration steps. NRIs are our specialty.
💬 Talk to us on WhatsAppThese are the general rules as of FY 2025-26 / FY 2026-27. Rates, thresholds and surcharge slabs are revised in Budget announcements, and edge cases (joint owners, GST on commercial rent, DTAA relief for the NRI's home country) can change the math. For an actual tenancy, confirm specifics with a chartered accountant before you deduct. This page is general information, not tax advice.
