TDS on Property & Rent in 2026: Rules, Rates & Thresholds

TDS — tax deducted at source — on property and rent is a buyer's and tenant's responsibility, not the seller's or landlord's, and getting it wrong creates liability for you. In 2026 the core rules are: a buyer must deduct 1% TDS when purchasing immovable property for 50 lakh or more from a resident seller (Section 194-IA); an individual or HUF tenant must deduct 2% TDS on house rent above 50,000 per month (Section 194-IB); and when the seller or landlord is an NRI, far higher rates under Section 195 apply with no 50 lakh threshold.

These are stable statutory rules, but thresholds and rates can be changed in any Union Budget — and one already has: the 194-IB rent rate was cut from 5% to 2% with effect from 1 October 2024. This guide sets out who deducts, how much, and by when, so you stay compliant whether you are buying a home, renting one, or dealing with an NRI counterparty.

Buying property: Section 194-IA (resident seller)

When you buy immovable property from a resident seller, you — the buyer — must deduct TDS and deposit it with the government. This is one of the most commonly missed compliance steps by home buyers.

• Rate: 1% of the sale consideration (source: ClearTax, Axis Max Life, IndiaFilings).
• Threshold: applies only when the property value is 50 lakh or more; below 50 lakh, no 194-IA TDS (source: same).
• Base: deduct on the higher of the sale consideration or the stamp-duty (guidance) value.
• Deposit and form: pay using Form 26QB within 30 days from the end of the month in which TDS is deducted; no TAN is required for the buyer (source: ClearTax).
• Issue Form 16B to the seller as proof of the TDS deducted.

Renting a home: Section 194-IB (individual/HUF tenant)

If you are an individual or HUF tenant paying high rent, you must deduct TDS on the rent — a rule many tenants do not realise applies to them.

• Applies to: individual or HUF tenants paying rent exceeding 50,000 per month for a house (source: EY, CAclubindia, Bizfoc).
• Rate: 2%, reduced from 5% with effect from 1 October 2024 by the Finance Act 2024 (source: EY alert, CAclubindia, SMEConnect).
• Timing: deduct once a year — in the last month of the financial year or the last month of tenancy, whichever is earlier — not every month.
• Form: deposit using Form 26QC; no TAN required for the tenant.

Rent paid by businesses: Section 194-I

A different section applies when the tenant is a business or other non-individual deductor — relevant for company leases and commercial tenancies.

• Rate: 10% on rent for land or building (source: Canara HSBC, NumberIQ TDS guides).
• Threshold: historically 2.4 lakh per year; Budget 2025 raised the 194-I threshold (reported as moving to 6 lakh per year, i.e. 50,000 per month, from FY 2025-26) — verify the current threshold (source: TDS-on-rent guides).
• 194-I (businesses) and 194-IB (individuals/HUFs) are distinct — apply the one that fits the deductor.

When the seller is an NRI: Section 195 (much higher)

If the seller is a non-resident, the rules change completely. Section 195 replaces 194-IA, the rates are far higher, and crucially there is no 50 lakh threshold — TDS applies from rupee one.

• Long-term capital gains (property held over 24 months): 12.5% without indexation for transfers on or after 23 July 2024, plus applicable surcharge and 4% health & education cess (source: Tax2win, Dineshaarjav, NoBroker).
• Effective maximum LTCG rate: about 14.95% (12.5% x 1.15 surcharge cap x 1.04 cess); surcharge on capital gains is capped at 15% (source: Dineshaarjav).
• Short-term gains (held 24 months or less): taxed at the NRI's applicable slab/rate, with TDS deducted accordingly (source: Tax2win, ClearTax).
• No 50 lakh threshold — TDS applies on the full consideration from the first rupee (source: NoBroker, ClearTax).
• The NRI seller can apply for a lower or nil deduction certificate under Section 197 so TDS is deducted on the actual gain rather than the full sale value — a key step to avoid over-deduction.

Rent paid to an NRI landlord

Paying rent to a non-resident landlord also falls under Section 195, not 194-IB, and the tenant must comply.

• TDS under Section 195 applies to rent paid to an NRI landlord, at the applicable rate plus surcharge and cess (source: Section 195 framework, ClearTax).
• Unlike 194-IB, this requires the tenant to hold a TAN and file the relevant TDS returns.
• The NRI landlord can seek a lower-deduction certificate under Section 197 if the actual tax liability is lower.

The penalties for getting it wrong

TDS is the deductor's liability. If you fail to deduct or deposit on time, the consequences fall on you — the buyer or tenant — not the seller or landlord.

• Interest for late deduction or late deposit, plus a late-filing fee for the TDS statement.
• Possible disallowance and penalty exposure for non-compliance, especially in NRI transactions where amounts are large.
• In NRI deals, under-deducting because you applied 194-IA (1%) instead of Section 195 is a common and costly error — confirm the seller's residential status in writing.

The honest takeaway

For a straightforward resident purchase, remember one line: 1% TDS over 50 lakh, deposited via Form 26QB within 30 days. For high rent, 2% via Form 26QC once a year. The real risk sits in NRI transactions, where rates jump to around 12.5% plus surcharge and cess with no threshold — misread that and the shortfall is yours to pay.

Thresholds and rates move in Budgets — the rent rate has already dropped to 2% and the 194-I threshold has been raised — so confirm the current figures and always verify the seller's or landlord's residential status before you deduct. When an NRI is involved, use a chartered accountant.