Looking for one payment type? These pages have the current rates, limits and a calculator: TDS on rent, TDS on professional fees and TDS on commission. This article compares the sections and helps you pick the right one.
Commercial rents, consulting fees, and sales commissions constitute the lifeblood of business operations in India. However, they also represent the highest audit risk under Indian tax scrutiny if TDS (Tax Deducted at Source) is overlooked, misclassified, or deducted under the wrong section.
Recent legislative changes rationalized multiple TDS rates—slashing commission TDS from 5% to 2% and individual rent TDS under Section 194IB to 2%.
Here is your operational blueprint for handling TDS on Rent (194I & 194IB), Professional/Technical Fees (194J), and Brokerage/Commission (194H) for FY 2025-26 and FY 2026-27.
Instant TDS Calculator & Section Finder
Don’t guess between 2% and 10%. Use our TDS Section Finder or browse categories on the TDS Rate Finder for an immediate calculation based on your payee and contract terms.
The Master Rate Matrix: Rent, Fees & Commissions
| Section | Nature of Transaction | Deductor / Payer Type | Threshold | TDS Rate (Valid PAN) | Non-PAN Rate |
|---|---|---|---|---|---|
| 194I(a) | Rent: Plant, Machinery, Equipment | Business liable to Tax Audit / Corporates | ₹50,000 / month (or part) | 2% | 20% |
| 194I(b) | Rent: Land, Building, Furniture, Fixtures | Business liable to Tax Audit / Corporates | ₹50,000 / month (or part) | 10% | 20% |
| 194IB | Rent: Residential / Commercial Premises | Individuals & HUF not liable to Tax Audit | ₹50,000 / month | 2% (Reduced from 5%) | 20% (Capped at 1 mo rent) |
| 194J(a) | Fees for Technical Services (FTS) / BPO | All businesses & Tax Audit assesses | ₹50,000 / year | 2% | 20% |
| 194J(b) | Fees for Professional Services & Royalty | All businesses & Tax Audit assesses | ₹50,000 / year | 10% | 20% |
| 194J | Director Sitting Fees / Remuneration | Any corporate entity | ₹0 (No threshold) | 10% | 20% |
| 194H | Commission or Brokerage | All businesses & Tax Audit assesses | ₹20,000 / year | 2% (Reduced from 5%) | 20% |
| 194M | Commission, Rent, Contract by Individuals | Individuals/HUF not covered in 194C/H/J | ₹50,00,000 / year | 2% (Reduced from 5%) | 20% |
TDS on Rent: Section 194I vs Section 194IB Explained
Section 194I (For Businesses & Audited Entities)
- Applies when the tenant is a company, firm, or an individual/HUF whose business turnover exceeded ₹1 Crore (or professional gross receipts exceeded ₹50 Lakhs) in the immediately preceding financial year.
- Threshold is ₹50,000 per month or part of a month per payee.
- Rate: 10% for office space/factory/building, 2% for hired plant and machinery.
- Requires TAN (Tax Deduction Account Number) and quarterly filing in Form 26Q.
Section 194IB (For Salaried & Small Individuals)
- Applies to individual tenants paying house rent exceeding ₹50,000 per month (or part of a month).
- The tenant does NOT need a TAN. TDS is filed using their own PAN via a challan-cum-statement in Form 26QC within 30 days from the end of the month in which the deduction is made.
- The statutory rate has been reduced from 5% to 2%.
- Deduction is made once a year in the last month of the tenancy (or March), whichever is earlier.
Section 194J: The 2% vs 10% Classification Battle
One of the most litigated areas during assessment is whether a payment is for Technical Services (2%) or Professional Services (10%):
When to Apply 2% (Section 194J(1)(a)):
- Fees for Technical Services (FTS): Rendering of any managerial, technical, or consultancy services (e.g., software maintenance, IT infrastructure hosting, SEO agency, routine call center operations).
- Invoices from call centers and IT support providers.
When to Apply 10% (Section 194J(1)(b)):
- Specified Professional Services: Legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, advertising, authorized representatives, film artists, and company secretaries.
- Payment of Royalty or non-compete fees.
- Director Remuneration: Any sitting fee or salary to a non-executive director where employee TDS (Sec 192) does not apply.
Section 194H: Rationalization of Brokerage & Commission
Finance amendments reduced the withholding rate under Section 194H from 5% to 2% to relieve working capital strain on distributors, agents, and marketing intermediaries.
- Trigger: Applies whenever aggregate commission/brokerage credited or paid to a resident agent exceeds ₹20,000 in a financial year.
- Exclusion: Underwriting commission, loan processing fees charged by scheduled banks, and insurance commission (which is governed under Section 194D).
Consequences of Non-Compliance: Section 40(a)(ia) Disallowance
If your business fails to deduct TDS on rent, professional fees, or commission, or fails to deposit it to the government treasury before the ITR due date under Section 139(1):
- 30% of the entire expense is disallowed under Section 40(a)(ia) and added back to your taxable net profit.
- Interest @ 1% per month is charged from the date tax was deductible to the date of actual deduction.
- Interest @ 1.5% per month is charged from the date of deduction to the date of actual deposit to the government.
- Penalty equal to the tax amount under Section 271C.
Frequently Asked Questions (FAQs)
What if the landlord or professional provides Form 15G / 15H?
Form 15G (for individuals below 60) and Form 15H (for senior citizens) can be submitted for rental income under Section 194I provided the landlord’s total estimated income is below the basic exemption limit. If accepted, the payer deducts 0% TDS and submits the details in Form 26Q quarterly.
Can a tenant avoid deducting 194IB by paying in 2 separate names?
If the property is jointly owned by a husband and wife with distinct co-ownership shares in the registered lease deed, and rent is paid separately (e.g., ₹40,000 to wife and ₹40,000 to husband), each co-owner receives less than ₹50,000 per month. Therefore, Section 194IB is not attracted. However, artificial splitting of contracts on single-owner properties will be struck down as tax evasion.