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  5. TDS on residential rent paid by companies: 2% vs 10% rule explained

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TDS on residential rent paid by companies: 2% vs 10% rule explained

balwant jain
By Balwant Jain

3 min read | Updated on May 27, 2026, 08:50 IST

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SUMMARY

Confused about TDS on residential rent paid by companies? Know whether 2% or 10% TDS applies when firms lease apartments for employees or visiting officers under Income-tax rules.

TDS on residential rent paid by companies

There are two different provisions under the income tax laws requiring the tenant to deduct tax from the amount of rent payable/rent. | Image: Shutterstock.

When companies lease apartments for senior executives, employees, or visiting officers, a common source of confusion is whether the TDS rate depends on the property's use, residential or commercial, or on the type of tenant.

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This becomes especially relevant when the monthly rent exceeds ₹50,000, as TDS provisions under the Income-tax Act prescribe varying rates and compliance requirements.

Today's Q&A explains such details in response to a query by a reader.

**Question: If a company takes on lease an apartment for residential purposes at say ₹90,000 pm for their officers or visiting officers, then what rate of TDS is deductible? Is it 2 per cent or 10 percent? **

Answer: There are two different provisions under the income tax laws requiring the tenant to deduct tax from the amount of rent payable/rent. The first requirement applies to all companies and the taxpayers whose accounts were audited in the year before the year in which the rent is being paid, due to their turnover exceeding the prescribed limits.

Such an audit is called a tax audit in common parlance. Such taxpayers are required to deduct tax at 10% if the monthly rent payable exceeds fifty thousand rupees. The requirement to deduct tax at source applies whether the rent is paid for commercial premises or residential premises. Such a person is required to deduct tax every month and deposit the same every month. Such taxpayers are required to obtain a tax deduction account number (TAN) to deposit the TDS and file the TDS returns periodically.

The other provision applies to all individuals and HUFs who are not covered under the above and are paying rent above fifty thousand rupees for a month or part of a month. Such taxpayers are required to deduct tax @ 2% on the amount of rent payable/paid. They are not required to deduct and deposit the TDS every month. They can deduct the tax from the amount of rent payable for March or the last month in case the tenancy expires earlier.

Such persons are not even required to obtain a TAN and can use a composite challan cum TDS return using the PAN of the tenant and the landlord for reporting and paying the TDS.

Since yours is a company assessee, it is covered under the first provision even though it has taken residential premises on lease. It will have to deduct tax every month on the rent paid/credited @ 10% of the rent. The company will have to deposit the tax every month by the 7th of the next month and file a TDS return every month.

Have a personal finance, mutual fund, or income tax query? We will try to get them answered by experts. Write to sangeeta.ojha@rksv.in
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Disclaimer: The views and opinions expressed above are those of respective experts/commentators and do not reflect the views of Upstox. The above Q&A is only for informational purposes and should not be considered investment or tax advice from Upstox. Please consult a tax expert for your complex tax problems.

About The Author

balwant jain
Balwant Jain is a Mumbai-based tax and investment expert.

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