Rent, Interest, Commission & Property TDS 2026: Section 194I, 194A, 194H, 194IA — Complete Guide
Four of the most common TDS compliance errors in practice involve these four payment categories: paying rent and not knowing whether the tenant or the landlord has to deal with TDS, earning bank interest and wondering why TDS was deducted, paying commission and calculating the threshold incorrectly, and buying a property above ₹50 lakh without realising the buyer has a TDS obligation. This guide covers all four — correctly.
Rent TDS — Two Different Provisions (194I and 194IB)
Section 194I: Applies to businesses, companies, and individuals/HUFs who are subject to tax audit. Threshold: ₹2,40,000/year.
Section 194IB: Applies to individuals and HUFs NOT subject to tax audit. Threshold: ₹50,000/month.
The TDS rate under 194IB is 5% — NOT 2%. Some older articles incorrectly state 2%. Section 194I (business/company) has different rates (2% for machinery, 10% for building). Verify which section applies to you before calculating.
Section 194I — Business, Company, and Tax-Audit Individuals/HUFs
| Type of Rental Asset | Annual Threshold | TDS Rate | Who Deducts |
|---|---|---|---|
| Land, Building, or Furniture | ₹2,40,000/year | 10% | Business/company tenant; individual/HUF if tax audit applicable |
| Plant and Machinery, Equipment | ₹2,40,000/year | 2% | Same as above |
Section 194IB — Individuals and HUFs Not Under Tax Audit
| Condition | Monthly Threshold | TDS Rate | When to Deduct |
|---|---|---|---|
| Individual/HUF tenant, not subject to tax audit | ₹50,000/month | 5% | Once in the financial year — in the last month of tenancy or last month of year, whichever is earlier |
Rate: 5% (higher than 194I’s 10% on building? No — 194IB is annual deduction, 194I is per-payment. 194I applies to each payment above ₹2,40,000/year.)
No TAN required for 194IB — file via Form 26QC using PAN only.
Deduction timing: NOT monthly — only once per year (or at end of tenancy).
Deposit deadline: Within 30 days from end of financial year (by April 30).
Certificate: Form 16C — generate from TRACES within 15 days of deposit.
Example — 194IB: Individual Tenant Paying ₹60,000/Month Rent:
Tenant: Priya (individual, not in tax audit). Landlord: Ramesh. Monthly rent: ₹60,000 (above ₹50,000 threshold).
TDS @ 5% of annual rent: ₹60,000 × 12 = ₹7,20,000 × 5% = ₹36,000.
Priya deducts ₹36,000 in March (last month of year). Pays Ramesh ₹24,000 in March instead of ₹60,000. Deposits ₹36,000 via Form 26QC by April 30. Issues Form 16C to Ramesh by May 15.
Ramesh claims ₹36,000 TDS credit in his ITR.
Example — 194I: Company Tenant Paying Office Rent:
Company: ABC Ltd. Office rent to landlord: ₹30,000/month = ₹3,60,000/year (above ₹2,40,000 threshold).
TDS @ 10% per payment: ₹30,000 × 10% = ₹3,000 deducted each month.
Annual TDS: ₹36,000. Deposited monthly by 7th of following month. Reported in quarterly Form 26Q.
Form 16A issued to landlord within 15 days of each quarterly return filing.
When the Annual Threshold Is Crossed Mid-Year
One of the most misunderstood aspects of 194I: once the annual threshold (₹2,40,000) is crossed, TDS applies to the entire year’s payments — not just the amount above the threshold.
Threshold Crossing — Retroactive Application:
Rent: ₹18,000/month. Annual = ₹2,16,000 — below ₹2,40,000 threshold.
Landlord requests rent increase to ₹22,000 from October. New annual total: ₹18,000 × 6 + ₹22,000 × 6 = ₹2,40,000 — exactly at threshold. If annual rent exceeds ₹2,40,000 — TDS applies from the first payment of the year, not from the payment that crossed the threshold.
Practical fix: once you know annual rent will exceed ₹2,40,000 — start deducting TDS from the first payment. If you started late — deduct excess in remaining months to catch up.
Interest TDS — Section 194A
| Payer | Payee Category | Annual Threshold | TDS Rate |
|---|---|---|---|
| Bank / Post Office / Co-operative Bank | General (below 60 years) | ₹40,000/year | 10% |
| Bank / Post Office / Co-operative Bank | Senior Citizen (60+ years) | ₹1,00,000/year (Budget 2024) | 10% |
| Other than bank (company FD, private loans, NBFC) | Any | ₹5,000/year | 10% |
Example — Company FD Interest:
Mr. Sharma invests ₹1 lakh in a company’s fixed deposit at 12% interest = ₹12,000 annual interest.
Threshold for “other than bank”: ₹5,000/year — threshold crossed.
TDS @ 10%: ₹1,200 deducted by the company before paying interest.
Mr. Sharma receives ₹10,800. Claims ₹1,200 TDS credit in ITR.
If the same ₹1 lakh was in a bank FD: threshold ₹40,000/year — ₹12,000 interest is below threshold — zero TDS.
Form 15G and 15H — Avoiding TDS on Interest
If your total income is below the basic exemption limit — you can submit Form 15G (general) or Form 15H (senior citizens) to the bank or company at the start of the financial year declaring that your income is not taxable. The bank/company then does not deduct TDS. This does not eliminate the tax obligation — it only removes the source deduction. You must still declare the income in your ITR and pay tax if applicable.
Commission and Brokerage TDS — Section 194H
| Payment Type | Annual Threshold | TDS Rate | Exception |
|---|---|---|---|
| Commission or Brokerage (general) | ₹15,000/year | 5% | — |
| Insurance Commission (Section 194D) | ₹15,000/year | 5% (individuals), 10% (companies) | Insurance agent commission — separate section |
| Securities transaction commission | Per SEBI guidelines | Separate rules | Stock brokers regulated separately |
- Real estate broker commission — paid by buyer or seller for property transaction
- Insurance agent commission — paid by insurance company to agent
- Travel agent booking commission
- Referral fees paid to business introducers
- Sales agent commission on goods sold
- E-commerce platform listing fees (if structured as commission)
Example — Real Estate Broker Commission:
Property sold for ₹80 lakh. Broker commission: 1.5% = ₹1.2 lakh paid to individual broker.
Threshold: ₹15,000/year — clearly crossed.
TDS @ 5%: ₹1,20,000 × 5% = ₹6,000 deducted from broker’s commission.
Broker receives ₹1,14,000. ₹6,000 deposited to government. Broker claims ₹6,000 TDS credit in ITR.
Property Purchase TDS — Section 194IA
This is the most commonly missed TDS obligation for individuals. Every buyer of immovable property above ₹50 lakh must deduct 1% TDS and file Form 26QB — regardless of whether they are a company, professional, or a salaried individual buying their first home.
| Aspect | Detail |
|---|---|
| Applicable to | All buyers of immovable property — individual, HUF, company, firm, anyone |
| Threshold | Sale consideration ₹50,00,000 or above |
| What is excluded | Rural agricultural land (urban agricultural land IS included) |
| TDS Rate | 1% of actual sale consideration paid to seller |
| TAN required? | No — PAN of buyer and seller sufficient |
| Filing form | Form 26QB — at incometax.gov.in |
| Deposit deadline | 30 days from end of month in which payment is made |
| Certificate to seller | Form 16B — generate from TRACES within 15 days of deposit |
| Applies even if | Seller has a loss on the transaction — 1% on consideration, not on profit |
Example — Home Buyer TDS:
Amit buys a flat for ₹75 lakh. Payment made in February 2026.
TDS: 1% of ₹75 lakh = ₹75,000.
Amit pays seller ₹74.25 lakh and deposits ₹75,000 via Form 26QB by March 31 (30 days from end of February).
Generates Form 16B from TRACES and gives to seller by April 15 (15 days after deposit).
Seller claims ₹75,000 TDS credit in their ITR.
If Amit pays full ₹75 lakh without deducting TDS: Amit is the defaulter. Interest @ 1.5%/month from payment date + penalty under Section 271C. Seller is not responsible — buyer’s obligation.
NRI Property Sellers — Different Rules Apply
When the seller of property is an NRI — Section 194IA’s 1% rate does NOT apply. Section 195 applies instead — and the TDS rate is based on the actual applicable capital gains tax rate.
| Aspect | Resident Seller (194IA) | NRI Seller (195) |
|---|---|---|
| TDS Rate | 1% of sale consideration | 20%–30%+ of capital gains (LTCG or STCG applicable rate) |
| TAN required for buyer | No | Yes — buyer must have TAN |
| Filing form | Form 26QB | Regular TDS challan + Form 27Q |
| TDS on | Sale consideration amount | Capital gains amount (or full consideration as default) |
| Lower TDS option | Form 15H not applicable | NRI can get Form 13 lower deduction certificate |
Joint Property — How TDS Works with Multiple Buyers or Sellers
Multiple Buyers
If property is purchased jointly (two or more buyers) — each buyer files a separate Form 26QB for their respective share of the consideration. If two buyers each pay 50% of ₹1 crore = ₹50 lakh each: TDS threshold check is per buyer per payment. Each buyer filing 26QB for their ₹50 lakh share: ₹50 lakh = exactly at threshold, TDS applies. Each deducts 1% of their payment amount separately using their own PAN.
Multiple Sellers
If property has multiple sellers — the buyer must file separate Form 26QB for each seller’s share. One buyer, two sellers (50-50) on a ₹1 crore property: one Form 26QB for ₹50 lakh to Seller 1 (PAN of Seller 1), another 26QB for ₹50 lakh to Seller 2 (PAN of Seller 2). Each seller receives their TDS credit separately in their own 26AS.
Lower or Nil TDS — Section 197 Certificate
If a payee’s actual tax liability is lower than the TDS that would be deducted at standard rates — they can apply to their Assessing Officer for a lower or nil deduction certificate under Section 197. Once the AO issues the certificate — the deductor must apply the certificate rate, not the standard rate.
- Application: Form 13 — filed at incometax.gov.in → My Account → Certificate under Section 197
- Timeline: Apply early (April/May) — AO processing takes 2–4 weeks
- Certificate specifies: valid period, payee PAN, applicable rate, maximum amount
- Deductor must: verify certificate authenticity, apply the specified rate, and keep a copy for records
- If deductor ignores a valid Form 13 and deducts at full rate: deductor is liable for excess deducted
Common users: businesses with temporary losses, exporters, companies with MAT credits, NRI sellers of property (Section 195 lower rate certificate).
PAN Not Available — Section 206AA Consequences
If the payee (landlord, lender, commission recipient, or property seller) does not furnish their PAN — Section 206AA mandates TDS at the higher of: 20% or twice the applicable TDS rate.
| Normal TDS Rate | Without PAN (206AA) | Extra Deduction |
|---|---|---|
| 10% (rent, interest) | 20% | 10% more per payment |
| 5% (commission, 194IB rent) | 20% | 15% more |
| 1% (property 194IA) | 20% | 19% more |
On a ₹50 lakh property purchase without seller’s PAN: 1% normal = ₹50,000 TDS. Without PAN: 20% = ₹10,00,000 TDS — twenty times more. The seller suffers — which is why sellers always provide PAN in property transactions. Always collect PAN from payees before making any payment above threshold. Verify at incometax.gov.in.
HRA and Rent TDS — Independent Processes
A common confusion: if an employee claims HRA exemption and the landlord receives rent above ₹2,40,000/year — is there any overlap between the HRA deduction and the landlord’s TDS?
No — they are entirely independent processes. HRA exemption is calculated between the employee and employer based on rent receipts and employer verification (Form 12BB). Rent TDS (if applicable) is between the tenant and landlord. The employer’s HRA calculation does not affect the landlord’s TDS liability. The landlord’s TDS does not change the employee’s HRA exemption calculation. Two separate parts of the tax system — no interaction.
Frequently Asked Questions
Q1. Who deducts TDS on property purchase — buyer or seller?
The buyer is responsible for deducting TDS (1% under Section 194IA) and filing Form 26QB. The seller receives the net amount (sale consideration minus 1% TDS). The seller then claims this as TDS credit in their ITR. The seller’s resistance to TDS deduction is not a valid reason to skip it — the buyer is the statutory defaulter if TDS is not deducted.
Q2. Is the ₹50,000 rent threshold for 194IB monthly or annual?
Monthly — ₹50,000 per month. Section 194IB applies to individual/HUF tenants (not in tax audit) paying more than ₹50,000 per month in rent. If monthly rent is ₹48,000 — no TDS under 194IB. If rent is ₹51,000/month — TDS at 5% on the annual rent applies, deducted once in March (or last month of tenancy).
Q3. Agricultural land — is property TDS applicable?
Rural agricultural land is excluded from Section 194IA. Urban agricultural land (located within municipal limits or notified urban areas) IS included — TDS at 1% applies if consideration is ₹50 lakh or above. The distinction is between rural and urban, not simply “agricultural” — verify land classification before assuming exemption.
Q4. Joint property with two buyers — how does Form 26QB work?
Each buyer files a separate Form 26QB for their proportionate share of the total consideration. If two buyers are each paying 50% of ₹1 crore — each files one Form 26QB for ₹50 lakh. Each deducts 1% of their payment (₹50,000 each). Each gets their own challan. If there are also two sellers — four Form 26QBs may be needed (each buyer × each seller’s share). Always map payments by buyer-seller combination.
Q5. What rate applies for 194IB rent TDS — 2% or 5%?
5% — under Section 194IB. The 2% rate applies to rent on plant and machinery under Section 194I (business/company deductors). Individual/HUF tenants not subject to tax audit who pay rent above ₹50,000/month must deduct at 5% under 194IB. The 2% figure in some articles is incorrect for this category.
Q6. Form 15G submitted — can the bank still deduct TDS?
If Form 15G/15H is validly submitted (declaring total income is below basic exemption) and the interest is below the specified limit — no TDS should be deducted. However, if you submit Form 15G but your total income actually exceeds the exemption limit, the declaration is invalid and you are responsible for any tax underpaid. Banks sometimes still deduct despite a valid 15G due to system errors — in such cases, claim the TDS credit in ITR and receive it as refund.
Conclusion
Four TDS sections — rent (194I and 194IB), interest (194A), commission (194H), and property (194IA) — cover the majority of TDS transactions outside salary and contractor/professional fees. The most critical corrections to remember: 194IB rent TDS rate is 5% (not 2%), commission threshold is ₹15,000 (not ₹20,000), property TDS is the buyer’s obligation (not seller’s), and NRI sellers attract Section 195 rates (20%+) not the 1% flat rate of 194IA.
For each section — collect PAN before payment, deduct correct rate, deposit by the 7th (or deadline specific to the form), file the applicable return quarterly, and issue the TDS certificate within the prescribed time. The penalties for missing any of these steps — ₹200/day return late fee, 1.5% interest, 271C penalty — are all avoidable with a calendar and a checklist.
Related Guides
Official Resources
- Income Tax Portal (incometax.gov.in) — Form 26QB (property), Form 26QC (rent by individual), PAN verification
- TRACES Portal (tdscpc.gov.in) — Form 16A, Form 16B, Form 16C generation and download
- TIN-NSDL — TDS challan payment, RPU/FVU download
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