Introduction
Paying rent in India comes with tax rules, and knowing the Section 194I threshold limit in India helps you decide when to deduct TDS. This limit sets the point where tax must be cut at source on rent for things like buildings, land, or equipment. Updated for 2025, the Section 194I threshold limit in India has changed to make it easier for small payers. Whether you’re a business renting office space or an individual with high rent, understanding the Section 194I threshold limit in India avoids penalties. In this guide, we’ll cover the latest limits, rates, and tips as of July 2025.
What is Section 194I?
Section 194I of the Income Tax Act requires TDS on rent payments to residents in India. It applies to non-individuals like companies or firms, and some individuals or HUFs. The rule covers rent for land, buildings, machinery, plant, equipment, furniture, or fittings, including factory spaces or attached land. TDS is deducted only if payments go over a set limit, ensuring tax collection early.
Individuals and HUFs must deduct TDS only if their business turnover is over Rs. 1 crore or professional income above Rs. 50 lakh last year, needing a tax audit under Section 44AB. For non-residents, use Section 195 with a 30% rate plus extras. This section helps the government get taxes upfront but skips small payments below the Section 194I threshold limit in India.
Latest Section 194I Threshold Limit in India for 2025
The Section 194I threshold limit in India is the minimum rent where TDS starts. If below this, no deduction is needed. For FY 2025-26, Budget 2025 brought changes effective from 1 April 2025.
- Current limit: Rs. 50,000 per month (or part month). TDS applies if monthly rent crosses this, checked each month.
- Old limit (before April 2025): Rs. 2,40,000 per year total.
This shift to monthly check reduces load on small renters. For example, Rs. 49,000 monthly means no TDS, even if yearly is over Rs. 5 lakh. But Rs. 50,001 in one month triggers TDS on that full amount. The limit is per payee and year, but now focuses on months. This change helps middle earners by skipping TDS for lower rents.
TDS Rates Under Section 194I
Rates for TDS under Section 194I depend on what you’re renting and stay the same for 2025-26. Deduct at payment or credit time, deposit by 7th next month (30 April for March).
Here’s a table for clarity:
| Type of Rent | TDS Rate | Notes |
|---|---|---|
| Plant, machinery, or equipment | 2% | For industrial or technical items |
| Land, building (factory included), furniture, or fittings | 10% | For homes, offices, or shops |
Without PAN from payee, rate goes to 20%. For GST in rent shown separately, TDS is on amount before GST.
Who Needs to Deduct TDS and Exemptions
Anyone paying rent over the Section 194I threshold limit in India to a resident must deduct TDS, except exempt individuals or HUFs. This includes businesses or those under audit.
Exemptions include:
- Rent under Rs. 50,000 per month.
- Personal use payments.
- Rent to REITs, firm partners, or on savings interest.
Special cases: For NRI owners, deduct 30% without limit, but treaties might help. The new limit boosts rental market by making low rents tax-free at source.
Penalties for Not Following Rules
Missing TDS deduction or deposit means 1% interest per month for no deduction and 1.5% for delays, plus fines up to the TDS amount. Late quarterly returns can cost up to Rs. 1 lakh and block expense claims in your tax return. Always comply to avoid checks or extra costs.
Tips for Easy Compliance in 2025
To handle the Section 194I threshold limit in India well:
- Track rent per month and payee.
- Use Challan ITNS 281 for deposits and Form 26Q for quarterly filings.
- Check PAN to skip 20% rate.
- Deduct TDS for high-rent months even if lease ends early.
- Watch Income Tax site for updates.
Frequently Asked Questions (FAQs)
What is the Section 194I threshold limit in India for 2025?
The Section 194I threshold limit in India is Rs. 50,000 per month starting April 2025. TDS applies if rent exceeds this in any month, unlike the old yearly Rs. 2,40,000.
Who must deduct TDS under Section 194I?
Businesses, companies, or audited individuals/HUFs paying rent over the Section 194I threshold limit in India to residents. Exempt for personal use or low turnover.
What are the TDS rates for rent in Section 194I?
Rates are 2% for machinery/equipment and 10% for land/buildings. Without PAN, it’s 20%. These apply above the Section 194I threshold limit in India.
Are there exemptions from Section 194I TDS?
Yes, no TDS below Rs. 50,000 monthly, for personal payments, or to certain groups like REITs. Check details to use the Section 194I threshold limit in India fully.
What if I miss TDS under Section 194I?
You’ll pay interest (1-1.5% monthly) and penalties up to TDS amount. Use TaxQue to track the Section 194I threshold limit in India and avoid mistakes.
Conclusion
The Section 194I threshold limit in India for 2025 makes rent taxes simpler with the new Rs. 50,000 monthly rule. By knowing when to deduct TDS, rates, and exemptions, you can manage payments without issues. This update helps small renters, but always track to stay compliant. If confused, TaxQue offers easy tools and advice for TDS and more. Keep updated, follow the tips, and handle your taxes smoothly this year.
