​📌 TDS on Rent for Commercial Property in Mumbai: A Complete Guide

Many landlords and tenants in Mumbai are unaware of how TDS on rent works, what rates apply, and how to comply with the law. Non-compliance can attract penalties and interest. This article will help you understand the concept in detail.

🔹 What is TDS on Rent?

TDS on rent is a mechanism under the Income Tax Act, 1961, where the tenant (payer) deducts a specified percentage of tax from the rent before making payment to the landlord (receiver). The deducted amount is then deposited with the government on behalf of the landlord.

This ensures that the government collects tax at the source itself, minimizing chances of tax evasion.

🔹 Applicability of TDS on Rent (Section 194-I & 194-IB)

1️⃣ Section 194-I

• Applicable when rent paid for land, building, or commercial property exceeds ₹2,40,000 per year.
• Deductor: Any individual (if liable to audit), partnership, company, LLP, trust, etc.

• Rate:

  • 10% on land/building rent if PAN is provided.
  • 20% if PAN not provided.

2️⃣ Section 194-IB

• Applicable when an individual or HUF not liable to audit pays monthly rent exceeding ₹50,000.
• Rate: 5% TDS.
• Deduction is made once a year (in the last month of the tenancy or financial year).

🔹 Example for Mumbai Tenants & Landlords

Suppose a tenant in Mumbai is paying ₹1,00,000 rent per month for an office space:

• Annual rent = ₹12,00,000.
• This exceeds the ₹2,40,000 limit.
• TDS @ 10% = ₹1,20,000 must be deducted and deposited by the tenant.
• Landlord receives net rent of ₹10,80,000 after TDS.

🔹 Steps for Tenants to Deduct & Deposit TDS

1. Calculate applicable TDS based on rent and section.
2. Deduct TDS at the time of payment/credit (whichever earlier).
3. Deposit TDS with the government using challan ITNS 281 (for 194-I) or Form 26QC (for 194-IB).
4. File TDS return (Form 26Q for 194-I or 26QC for 194-IB).
5. Issue TDS certificate (Form 16A or 16C) to the landlord.

🔹 Important Considerations for Mumbai Properties

• Co-working spaces: Rent agreements often include shared services—clarify what portion qualifies as “rent.”
• Lease agreements: Stamp duty & registration in Maharashtra should be valid for TDS compliance.
• GST on rent: If landlord is GST registered, rent above ₹20 lakh (in aggregate turnover) attracts GST @ 18%. TDS and GST are separate compliances.
• NRI landlords: If the landlord resides outside India, Section 195 applies (TDS @ 30% plus surcharge & cess).

🔹 Penalties for Non-Compliance

• Failure to deduct TDS: Penalty equal to the amount of tax not deducted.
• Late deposit of TDS: Interest @ 1.5% per month.
• Late filing of return: Fee under Section 234E (₹200 per day).

🔹 Benefits of Proper Compliance

✅ Avoid penalties & legal hassles
✅ Smooth property transactions
✅ Transparency between tenant & landlord
✅ Helps landlord claim credit while filing ITR

📞 Contact Experts in Mumbai

At TAXAJ, we specialize in helping businesses, startups, and property owners in Mumbai comply with TDS on rent requirements.

👉 Our services include:

• Drafting & reviewing rent agreements
• TDS calculation & monthly compliance
• Filing Form 26QC / 26Q
• Issuing TDS certificates to landlords

• GST & TDS advisory for commercial property deals