TDS on actual rent kicks in only when the annual rent exceeds Rs. 2,40,000 (i.e., more than Rs. 20,000 per month), with deductions applicable at 10% for land/building/furniture, and 2% for machinery or equipment, subject to PAN availability. So, is TDS applicable on security deposit for rent? Under Section 194I of the Income Tax Act, TDS is not applicable on refundable security deposits, as they are not considered income for the landlord they're expected to be returned in due course.
Is TDS Applicable on Security Deposit?
Thus, if you pay a deposit that’s refundable at the end of the lease, you don’t deduct TDS on that amount.
However, if the security deposit is non-refundable or later adjusted as advance rent, it becomes liable to TDS, as it then effectively constitutes rental income.
For individuals or HUFs not liable to audit who pay rent exceeding Rs. 50,000 per month, Section 194IB applies, and TDS is deducted at a flat 2% again, only on rent, not on refundable deposits.
I hope this helps!
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Is TDS Applicable On Security Deposit For Rent?
ruchi5
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2025-08-14T07:40:20+00:00 2025-08-14T07:40:22+00:00Comment
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