TDS and GST on Rent 2026: Tax Rules for Business and Commercial Property Rent

Businesses and professionals operating from rented premises need to understand the TDS and GST implications on rent before making payments to their landlord. Paying the entire rent without checking the applicable provisions can lead to interest, late fees, notices and expense-disallowance issues.

The issue becomes particularly important where a shop, office, warehouse, factory or other business premises is taken on rent. Depending on the status of the tenant and landlord, TDS on rent, GST under forward charge or GST under the Reverse Charge Mechanism (RCM) may apply.

Scope: This guide focuses on commercial/business premises and generally assumes that the landlord is resident in India for TDS purposes. Payments to a non-resident landlord require a separate withholding analysis.

TDS on Rent Under the Income-tax Act, 2025

From 1 April 2026, rent TDS is governed by Section 393(1), Table Sl. No. 2 of the Income-tax Act, 2025. The ₹50,000 monthly threshold applies in two different categories, but their rates, deduction timing and filing procedures are not the same.

For both categories, the provision is triggered where rent exceeds ₹50,000 for a month or part of a month, subject to the relevant statutory conditions.

Category 1: Companies, Firms and Covered Individuals/HUFs

The general rent-TDS category covers persons other than specified individuals/HUFs. An individual or HUF carrying on business or profession also falls in this category where the preceding year’s turnover or gross receipts exceed:

• ₹1 crore for business; or
• ₹50 lakh for profession.

These figures classify the rent-TDS category; they should not be confused with every exception or enhanced threshold that may separately apply while determining tax-audit liability.

For commercial land, a shop, office, factory building, furniture or fittings, the TDS rate is generally 10%. Rent for plant, machinery or equipment generally attracts 2%.

Example: Monthly Shop Rent of ₹80,000

Suppose a company, firm or covered individual/HUF pays ₹80,000 per month for a shop to a resident landlord:

• Gross rent: ₹80,000;
• TDS at 10%: ₹8,000;
• Net payment to landlord: ₹72,000; and
• ₹8,000 deposited with the Government.

The deduction is made at the time of credit or payment, whichever occurs earlier. If the landlord provides a valid lower- or nil-deduction certificate, the certificate must be checked before applying a reduced rate.

For professional assistance, visit TaxClear TDS Return Filing Services.

Category 2: Individual/HUF Not Covered by the General Category

An individual or HUF not falling in the general category must still deduct TDS where rent paid to a resident exceeds ₹50,000 for a month or part of a month. This can apply even where the tenant is salaried or has no business or professional income.

The important differences are:

• TDS rate: 2%;
• No TAN is required—the tenant can use PAN;
• Tax is generally deducted in the last month of the tax year or the last month of tenancy;
• The challan-cum-statement is filed through Form 141, Schedule A;
• Form 141 is filed within 30 days from the end of the month in which TDS is deducted; and
• The landlord receives a TDS certificate in Form 132.

Example for an Individual/HUF

If an individual not covered by the general category pays ₹80,000 per month for 12 months, the annual rent is ₹9.60 lakh. TDS at 2% is ₹19,200, generally deducted at the prescribed year-end stage rather than ₹8,000 every month.

This distinction is important: the 10% monthly example should not be applied to every individual or HUF paying rent.

The Income Tax Department has published detailed official FAQs on TDS on rent under the Income-tax Act, 2025.

TDS Deposit and Return Due Dates

General Rent-TDS Category

• TDS is normally deposited within 7 days from the end of the month in which it was deducted.
• TDS deducted in March is generally deposited by 30 April.
• A quarterly TDS statement is filed in Form 140.
• The TDS certificate is issued in Form 131 within the prescribed time.

Individual/HUF Special Rent Category

• Deposit and challan-cum-statement are completed through Form 141, Schedule A.
• The filing is due within 30 days from the end of the month in which TDS is deducted.
• No separate quarterly Form 140 is required for this transaction.
• Certificate Form 132 is issued to the landlord.

Deduction, deposit, statement filing and certificate issuance are separate compliance steps. The new Form 141 consolidates the earlier transaction-based challan-cum-statements, including the earlier Form 26QC process.

GST on Commercial Rent: Landlord and Tenant Status

Renting commercial immovable property is generally a taxable service at 18% GST. Who pays the tax depends mainly on the registration status of the landlord and tenant.

The RCM entry covers renting of immovable property other than a residential dwelling by an unregistered person to a registered person. Composition taxpayers were subsequently excluded from this commercial-rent RCM entry.

The policy change was announced after the 54th GST Council meeting, while the composition-taxpayer exclusion was addressed in the 55th GST Council meeting recommendations.

GST Where the Landlord Is Registered

Where a GST-registered landlord rents commercial property, the landlord generally issues a tax invoice and charges GST under the forward charge mechanism.

The landlord collects the GST from the tenant and reports and pays it through the applicable GST returns. An eligible normal taxpayer tenant may claim ITC subject to Sections 16 and 17 of the CGST Act, possession of a valid invoice, business use and other conditions.

A composition taxpayer cannot claim input tax credit.

GST Under RCM Where the Landlord Is Unregistered

Where an unregistered landlord rents commercial property to a normal GST-registered tenant, the tenant generally becomes liable under RCM.

The registered tenant should ordinarily:

• Determine the applicable taxable value and GST;
• Issue the required self-invoice for the supply received from the unregistered landlord;
• Issue the prescribed payment voucher where applicable;
• Report the RCM liability in the GST return; and
• Pay the tax through the electronic cash ledger.

Existing ITC cannot be used to discharge the RCM liability itself.

Can ITC Be Claimed on GST Paid Under RCM?

A normal GST-registered tenant may claim ITC of GST paid under RCM after discharging the tax in cash, provided:

• The premises are used in the course or furtherance of taxable business;
• The required self-invoice and supporting documents are maintained;
• The tax has actually been paid;
• The credit is not blocked or restricted under Section 17; and
• All other ITC conditions and time limits are satisfied.

ITC is therefore conditional, not automatic. Taxpayers making exempt supplies or using the premises partly for non-business purposes may need proportionate reversal. A composition taxpayer cannot claim ITC.

For assistance with RCM reporting and input-tax credit, visit TaxClear GST Return Filing Services.

Rent Agreement Used for GST Registration

A rent or lease agreement is commonly submitted as proof of the principal place of business. However, the document should match the actual arrangement.

Review the position where:

• The agreement names a landlord but rent is not actually paid;
• Rent is paid but not recorded in the books;
• The premises have changed but the GST registration has not been amended;
• The landlord’s GST status was not checked; or
• RCM has been ignored despite the tenant being a normal registered taxpayer.

Not every free-use arrangement requires artificial rent payment. Where premises are genuinely provided without rent—such as by a relative or owner—a valid consent letter/NOC and ownership evidence may be the appropriate registration documents. The business should not retain a rent agreement that contradicts the real arrangement.

Can Commercial Rent Be Claimed as a Business Expense?

Rent paid wholly and exclusively for business or professional purposes can generally be recorded as a business expense, subject to the applicable income-tax provisions and supporting evidence.

Businesses should preserve:

• Rent or lease agreement;
• Bank/payment records;
• Landlord’s PAN and GST details;
• TDS challans, statements and certificates;
• GST invoices or RCM self-invoices;
• RCM payment records and ITC workings; and
• Evidence that the premises are used for business.

Failure to comply with applicable TDS provisions can result in interest, late fees and possible disallowance of part of the expenditure. Claiming rent in the accounts does not remove the separate TDS and GST obligations.

For bookkeeping and expense-compliance support, visit TaxClear Accounting Services.

Frequently Asked Questions

Is TDS applicable on commercial property rent?

Yes. TDS can apply to rent paid for a shop, office, warehouse or other premises where rent exceeds ₹50,000 for a month or part of a month and the other statutory conditions are satisfied.

Is the TDS rate always 10%?

No. The general rate for land or building rent is 10%, but an individual/HUF not covered by that general category generally deducts 2% under the separate provision. Plant and machinery rent can also attract 2%.

Does every individual need a TAN for rent TDS?

No. An individual/HUF deducting under the special 2% rent provision can use PAN and file Form 141 Schedule A without obtaining TAN.

When is rent TDS deposited?

General-category TDS is normally deposited by the seventh day after month-end, with March TDS due by 30 April. The special individual/HUF transaction is deposited through Form 141 within 30 days from the end of the month of deduction.

Who pays GST if the landlord is registered?

The registered landlord generally charges 18% GST under forward charge and pays it through the applicable GST return.

What if the landlord is unregistered but the tenant is normally GST registered?

The registered tenant generally pays 18% GST under RCM for commercial immovable-property rent, issues the required self-invoice and pays the liability in cash.

Does commercial-rent RCM apply to a composition taxpayer?

The current commercial-rent RCM entry excludes a tenant registered under the composition levy scheme.

Can ITC be claimed on GST paid under RCM?

A normal registered taxpayer may claim eligible ITC after paying RCM in cash, subject to business use and all conditions and restrictions under the CGST Act.

Can business rent be claimed as an expense?

Yes, where it is incurred for business and properly supported. TDS and GST compliance must still be completed separately.

Disclaimer: This article is for general informational purposes and does not constitute tax or legal advice. Rent arrangements, landlord residence, GST registration status, composition status, property use and contractual terms should be checked before applying the provisions.