If a company, a travel agency, or any GST-registered business regularly books rooms at your property and pays your bills, there is a good chance a small slice of that payment never reaches your bank account at all. It gets deducted at source under the Income Tax Act and deposited directly with the government on your behalf, as an advance against the income tax you will eventually owe.
This is Tax Deducted at Source, TDS, on rent, and hotel and homestay owners across India routinely get caught out by it, either because a corporate client deducts TDS that the owner did not expect and cannot immediately explain, or because a payer wrongly deducts TDS on a booking that should never have attracted it in the first place. Both situations are avoidable once you understand the actual rule.
This page covers what currently applies from 1 April 2026 under the Income Tax Act, 2025, which replaced the older Income Tax Act, 1961 and renumbered the TDS provisions property owners used to know as Section 194-I and Section 194C. It explains when a corporate guest’s payment for your rooms is legally treated as “rent” for TDS purposes, when it is not, what rate and threshold apply, and what this means for your own bookkeeping and tax filing.
What TDS on Rent Actually Means
Tax Deducted at Source is a mechanism where the person making certain kinds of payments, called the deductor, withholds a percentage of the payment and deposits it directly with the Income Tax Department, rather than paying the full amount to the person receiving it, called the deductee. The deductee, in this case your property, then claims credit for that deducted amount against its own final income tax liability when filing its annual return.
TDS on rent exists because rental income, including hotel accommodation treated as rent, is otherwise easy to under-report, and the government would rather collect a portion of the tax as the payment happens than rely entirely on the recipient declaring it correctly months later. It applies across many kinds of payments, salaries, professional fees, commission, contractor payments and rent among them, each with its own section, rate and threshold.
For a hotel, homestay or resort, the relevant question is narrower: does a corporate guest’s payment for your rooms count as “rent” for this purpose at all, and if it does, does it cross the threshold that actually triggers deduction? Both questions have specific, well-established answers, covered in detail below.
The Law: Section 393(1) of the Income Tax Act, 2025 (Formerly Section 194-I)
Until 31 March 2026, TDS on rent for land, building or furniture, which is how hotel accommodation is classified when it qualifies as rent at all, was governed by Section 194-I of the Income Tax Act, 1961. From 1 April 2026, the Income Tax Act, 2025 replaced the 1961 Act entirely and consolidated most non-salary TDS provisions, including the old Sections 194A, 194C, 194H, 194-I, 194J and several others, into a single Section 393, with each category of payment listed as a separate serial number in a table within that section.
The provision that used to be Section 194-I now appears as Section 393(1), Table Serial Number 2, of the Income Tax Act, 2025. The rate and the underlying logic carried over unchanged: 10% TDS applies to rent paid for the use of land, building (including a factory building), or furniture and fittings, which is the category hotel accommodation falls under when it counts as rent. A separate, lower 2% rate applies only to rent for machinery, plant or equipment, which is not relevant to a hotel room.
The threshold for this TDS was changed by the Union Budget presented in 2025, before the wider Act replacement took effect: it moved from an annual aggregate limit of ₹2,40,000 in a financial year to a monthly test of ₹50,000 for a month or part of a month. That monthly threshold carried over into Section 393(1) of the Income Tax Act, 2025 without further change. In practice this means a payer checks, month by month, whether the rent-equivalent payment to a single property crossed ₹50,000 that month, rather than adding up a full year’s payments before deciding whether to deduct.
Casual Bookings vs “Regular Basis”: The Test That Decides Whether TDS Applies At All
The single most important, and most commonly misunderstood, part of this entire rule is that not every corporate payment to your property counts as “rent” in the first place. The Central Board of Direct Taxes settled this question years ago, in Circular No. 715 of 1995 and Circular No. 5 of 2002, and the underlying test still applies to how “rent” is interpreted under Section 393(1) of the Income Tax Act, 2025.
TDS on rent applies only when a company takes hotel accommodation on a regular basis, meaning specific rooms are earmarked or reserved for that company under an agreement, or the hotel is under a legal obligation to provide rooms to that company whenever asked. This looks like a company that has, in effect, taken a block of rooms on a standing arrangement, whether or not every room is occupied every night.
It does not apply to a standard rate-contract arrangement, the kind most properties already have with corporate clients or travel agents, where rates are pre-agreed for convenience and volume, but no specific rooms are reserved, occupancy is entirely optional booking by booking, and the hotel has no obligation to hold anything vacant for that client. This is the large majority of corporate business most hotels, homestays and resorts actually see, and it falls outside Section 393(1) entirely, regardless of how much the company spends with you across the year.
It also does not apply at all to individual leisure travellers booking for themselves, since TDS on rent is only relevant when the payer is a business or professional entity of the kind the law requires to deduct tax, covered in more detail below, not when the payer is a private individual paying for their own personal stay.
Rate and Threshold at a Glance
These figures apply from 1 April 2026 under the Income Tax Act, 2025, and only when the payment counts as rent under the regular-basis test above.
| What | Detail |
|---|---|
| Section | Section 393(1), Table Serial Number 2, of the Income Tax Act, 2025 (successor to old Section 194-I) |
| What it covers | Rent for land, building (including a factory building) or furniture and fittings, the category hotel accommodation falls under when it counts as rent |
| Rate | 10% |
| Threshold | ₹50,000 for a month or part of a month (checked month by month, not as an annual total) |
| Who must deduct | Any payer other than an individual or Hindu Undivided Family, plus an individual or Hindu Undivided Family whose business turnover exceeded ₹1 crore, or professional receipts exceeded ₹50 lakh, in the immediately preceding financial year |
| Calculated on | The base rent amount, excluding GST charged separately on the invoice |
When It’s a Banquet or Event Contract Instead of Rent
A separate, and separately confusing, question comes up when a hotel hosts a company’s conference, seminar, wedding or other event: does the payment for the banquet hall, catering and event services fall under the same rent provision, or under a different one?
Where the charge is genuinely for a composite package of services, banquet hall hire bundled with catering, decor, audio-visual equipment and staffing, rather than for accommodation as such, this is generally treated as a contractual payment rather than rent, and falls instead under Section 393(1), Table Serial Number 6, of the Income Tax Act, 2025, the provision that replaced the old Section 194C for payments to contractors.
Under this provision, TDS applies at 1% if the party receiving payment is an individual or a Hindu Undivided Family, or 2% for any other kind of entity, including most hotel companies. It applies once a single contract or bill exceeds ₹30,000, or once total payments to the same property in a financial year exceed ₹1,00,000, whichever happens first, and once either threshold is crossed, TDS applies to the full payment, not merely the amount above the threshold.
Where a company’s payment genuinely is for room accommodation alone, with no meaningful bundled service beyond the room itself, the rent provision in Section 393(1), Table Serial Number 2, covered above, and its ₹50,000-a-month threshold and 10% rate, is the one that applies instead, subject to the same regular-basis test. Properties that host both accommodation and event business for the same corporate client should expect their invoices, and any TDS deducted against them, to be split along these lines rather than treated as one single payment type.
TDS Is Calculated on the Base Rent, Not the GST-Inclusive Total
GST and TDS are separate systems and should not be mixed up when a corporate client’s accounts team calculates what to deduct. TDS on rent is calculated on the base room rent only, the amount before GST is added, not on the GST-inclusive total shown at the bottom of your invoice.
For example, a room billed at ₹60,000 for a month with 5% GST added comes to ₹63,000 on the invoice, but TDS at 10% is calculated on the ₹60,000 base amount, ₹6,000, not on ₹63,000. If your invoice does not clearly separate the base rent from the GST amount, a payer’s accounts team may calculate this incorrectly, usually by deducting TDS on the full GST-inclusive figure, which takes more out of your payment than the law actually requires. A clearly itemised invoice, showing base rent and GST as separate line items, is the simplest way to avoid this.
Share Your PAN, or a Higher Rate Applies Automatically
There is one more detail worth knowing even if none of the above changes your day-to-day operations: if your property does not furnish its PAN to the company paying you, the payer is required to deduct TDS at a higher rate.
Under Section 397(2) of the Income Tax Act, 2025, the successor to the older Section 206AA, a payer must deduct TDS at whichever is higher, the normal rate that would otherwise apply, 10% for rent under Section 393(1) Table Serial Number 2, or a flat 20%, if the person or entity being paid has not provided a valid PAN. In practice, since 20% is higher than the normal 10% rent rate, a property that has not shared its PAN with a corporate client ends up having 20% deducted instead of 10%, a meaningful difference that reduces the amount actually received.
Who Actually Has to Deduct: Not Every Business Guest
TDS on rent under Section 393(1) is not something every guest, or even every business guest, has to worry about. It only applies to a specific category of payer.
Companies, partnership firms, LLPs, trusts and similar entities booking rooms on the regular-basis arrangement described above must deduct TDS regardless of size, once the ₹50,000-a-month threshold is crossed. Individuals and Hindu Undivided Families are exempt from this requirement by default, with one exception: an individual or Hindu Undivided Family whose business turnover exceeded ₹1 crore, or whose professional receipts exceeded ₹50 lakh, in the financial year immediately before the one in which the payment is made, must also deduct TDS, since that turnover level puts them under the same tax-audit obligation that triggers TDS responsibilities generally.
- A large company booking rooms under a standing agreement, with rooms earmarked for its staff, and paying more than ₹50,000 to your property in a given month: must deduct TDS.
- A self-employed consultant or freelancer, filing as an individual, whose professional receipts were below ₹50 lakh in the previous financial year, booking a room for a business trip: does not need to deduct TDS, even on a large bill.
- A small proprietorship firm with turnover under ₹1 crore in the previous financial year, booking rooms occasionally for staff travel with no reserved inventory: falls outside the regular-basis test in the first place, so this question does not arise.
- An individual leisure traveller paying for their own family holiday: never relevant, TDS on rent only concerns business or professional payers meeting the conditions above.
Advance Payments and Long-Stay Corporate Housing
Two situations that come up often enough to deserve their own mention are advance payments and extended corporate stays for relocating or long-term staff.
TDS on rent is triggered at whichever happens first, the amount being credited to your account in the payer’s books, or the payment actually being made, whichever is earlier. This means an advance paid before a guest even checks in is not exempt just because the stay itself has not happened yet, if the underlying arrangement meets the regular-basis test and the advance amount, or the running monthly total including it, crosses ₹50,000, TDS applies to the advance the same way it would to a final settlement.
Long-stay corporate housing, where a company puts a relocating employee up at your property for several weeks or months while they find permanent accommodation, is one of the clearest examples of a regular-basis arrangement in practice, a specific room is effectively held for that one employee for an extended, continuous period under an agreement with their employer. Properties that host this kind of extended corporate stay should expect TDS to apply from the point the monthly billing first crosses ₹50,000, and should set up their invoicing for that arrangement, PAN clearly shown, base rent and GST separated, from the very first invoice rather than partway through the stay.
A Worked Example
Say a mid-size logistics company has a standing agreement with your resort, three rooms earmarked year-round for staff on rotation, and it settles your invoice at the end of each month. In March, its bill for those three rooms comes to ₹90,000 in base rent, plus 5% GST of ₹4,500, for a total invoice of ₹94,500.
Since the arrangement is a regular-basis one with rooms earmarked under an agreement, and ₹90,000 crosses the ₹50,000-a-month threshold, the company is required to deduct TDS at 10% on the base rent of ₹90,000, which comes to ₹9,000. It pays your property ₹85,500, the ₹94,500 invoice total minus the ₹9,000 TDS, and issues a TDS certificate (Form 16A) confirming the deduction. Your property does not lose that ₹9,000, it becomes a tax credit reflected in your Form 26AS and Annual Information Statement, which you claim against your own income tax liability when you file your return for that year.
| Item | Amount |
|---|---|
| Base rent for 3 rooms, March | ₹90,000 |
| GST at 5% | ₹4,500 |
| Invoice total | ₹94,500 |
| TDS deducted (10% of base rent) | ₹9,000 |
| Net amount received by the property | ₹85,500 |
| Reflected as | Tax credit in Form 26AS / AIS, claimed when filing the property’s income tax return |
How to Handle This Without It Becoming a Headache
Handling TDS well is mostly a matter of good invoicing and bookkeeping habits, not a complicated compliance burden. A short, repeatable process covers almost every case.
- Work out whether a given corporate client is a regular-basis arrangement or a rate contract, using the one-question test above, rooms reserved or not, obligation to hold vacancy or not, and keep a short note of which category each recurring client falls into.
- Share your property’s PAN clearly on every invoice, and confirm it directly with any new corporate client before the first payment, so you are never deducted at the higher 20% rate under Section 397(2) for a missing PAN.
- Itemise every invoice to show base rent and GST as separate line items, so a payer’s accounts team calculates TDS on the correct base amount rather than the GST-inclusive total.
- When TDS is deducted, confirm you receive a TDS certificate, Form 16A, from the payer for that quarter, and check it against your own records rather than assuming the deducted amount was correct.
- Reconcile deducted TDS against your Form 26AS and Annual Information Statement on the income tax portal before filing your return each year, since this is where you actually claim the credit for tax already deducted on your behalf.
- If a payer deducts TDS on a booking that clearly does not meet the regular-basis test, a one-off event booking with no reserved rooms, for instance, raise it with them directly. TDS wrongly deducted is still a valid credit you can claim, but it is worth flagging so the payer corrects their process for future bookings.
Common Mistakes Properties Make
Why Corporate Clients Take This Seriously (Even Though It Isn’t Your Penalty)
This page is written primarily for your side of the transaction, but it helps to understand why a corporate client’s accounts team is often careful, sometimes overly careful, about deducting TDS correctly on your invoices, since the consequence of getting it wrong falls mainly on them, not on you.
Under Section 35(b) of the Income Tax Act, 2025, if a company was required to deduct TDS on a payment to your property and either failed to deduct it, or deducted it but did not deposit it with the government by the return-filing deadline, 30% of that payment gets disallowed as a business expense in the company’s own tax computation. This is a real cost to the payer, not to you, but it explains why a well-run corporate accounts team will sometimes ask questions, or double-check your PAN and invoice details, before settling a bill, and why a poorly-run one occasionally deducts TDS defensively on bookings that do not actually require it.
None of this creates a direct penalty for your property. Your only real exposure is indirect: an invoice that is unclear about the base rent versus GST, or that omits your PAN, makes it more likely a cautious payer over-deducts, or a careless one under-deducts and later tries to recover the shortfall from a future payment. Clear invoicing protects you from both outcomes.
A Few Common Scenarios
A Quick Checklist
- Worked out which corporate clients are regular-basis (rooms reserved) versus rate-contract (no reserved rooms, optional occupancy)
- Shared your property’s PAN clearly on every invoice, and confirmed it directly with new corporate clients
- Itemised invoices to show base rent and GST as separate line items
- Collected a Form 16A TDS certificate for every quarter TDS was deducted
- Reconciled deducted TDS against Form 26AS and the Annual Information Statement before filing your return
- Billed banquet, catering and event packages separately from room rent, since they fall under a different provision and rate
How OpenStays Fits Into This
OpenStays does not sit between a corporate guest and your property as a payment intermediary the way some booking platforms do, and it does not withhold TDS, GST or any other deduction from what a guest pays through it. Payments made through OpenStays’ booking engine go directly to your own bank account or UPI ID, so when a corporate client deducts TDS on a payment, that deduction happens cleanly between the two of you, the same as it would on any bill you raised yourself, with nothing added or complicated by a platform sitting in between.
What OpenStays can help with directly is the paperwork trail: its Guest CRM keeps a running record of which corporate clients book with you, how often, and at what rates, which is exactly the information you need to work out whether a given client’s arrangement looks like a regular-basis booking or a casual rate contract. Clear, itemised invoicing showing base rent and GST separately, the habit that avoids most TDS calculation errors described on this page, is also easier to maintain consistently when your booking and billing run through one system rather than being reconstructed from scattered records at tax time.
Frequently Asked Questions
Does TDS apply to individual guests paying for their own stay?
No. TDS on rent under Section 393(1) of the Income Tax Act, 2025 only concerns business or professional payers of a certain kind, covered above, an individual booking and paying for their own personal stay is never relevant to this provision, regardless of the bill amount.
What is the current TDS rate on hotel room rent?
10%, under Section 393(1), Table Serial Number 2, of the Income Tax Act, 2025, the provision that replaced the old Section 194-I. This applies only when the booking meets the regular-basis test described on this page and the monthly threshold of ₹50,000 is crossed.
What is the threshold before TDS applies?
₹50,000 for a month or part of a month. This is checked month by month rather than as a running annual total, a change made by the Union Budget presented in 2025 and carried into the Income Tax Act, 2025.
Do OTA commissions attract this same TDS?
No. Payments an online travel agent makes to your property, or commission it deducts, are governed by a different provision dealing with e-commerce operators, not the rent provision covered on this page. This page concerns direct corporate payments for accommodation, not OTA commission structures.
What happens if a corporate client wrongly deducts TDS on a casual, rate-contract booking?
The deduction is still a valid credit you can claim against your own tax liability when filing your return, it does not become lost money. It is still worth pointing out to the payer that the booking does not meet the regular-basis test, so future bookings with that client are not deducted unnecessarily.
Can a hotel or homestay be an individual for this purpose and avoid deducting TDS on its own payments to others?
This page covers TDS deducted by a corporate client paying your property, not TDS your own property might need to deduct when paying others, which is a separate question depending on your own business structure and turnover. A property registered as an individual proprietor with turnover below the tax-audit threshold, ₹1 crore for a business, is generally not required to deduct TDS on its own payments to other parties.
Does this apply the same way in every Indian state?
Yes. This is a national provision under the Income Tax Act, 2025, not a state law, so the rate, threshold and regular-basis test apply identically to a property in any Indian state or Union Territory.
Is a Form 16A certificate necessary, or is the deduction enough on its own?
Collecting the Form 16A certificate matters, since it is the document that confirms the deduction to the tax department and supports the credit you claim in your own return. Reconciling it against your Form 26AS and Annual Information Statement, rather than only checking the amount you actually received, is the safer habit.
Is the TDS rate different for banquet hall or event bookings compared to room rent?
Yes. Room rent for regular-basis corporate stays falls under Table Serial Number 2 of Section 393(1), at 10%. A banquet hall, conference room, or event-space booking under a works contract or service arrangement is typically treated as a contract payment under Table Serial Number 6 instead, deducted at 1% for an individual or HUF payer and 2% for any other entity. Many corporate bills mix both room nights and a banquet function in the same invoice, so it helps to show the two charges as separate line items rather than one combined figure, since the client’s accounts team otherwise has to split it themselves before deducting the correct rate on each part.
What happens if the corporate client is a foreign company with no PAN or Indian address?
A payer without a PAN faces a steeper deduction under Section 397(2) of the Income Tax Act, 2025, which is the direct successor to the old Section 206AA: TDS is deducted at the higher of the normal rate, the rate specified in the relevant provision, or 20%, whichever works out highest. This is the payer’s responsibility to get right, not the hotel’s, but it explains why a foreign corporate client’s finance team may ask more questions about PAN and documentation than a domestic one would. The hotel’s own obligation stays the same either way: issue a correct, GST-compliant invoice and reconcile the Form 16A the client eventually provides against Form 26AS or the Annual Information Statement.
Does GST get included when checking whether the Rs. 50,000 monthly threshold is crossed?
The threshold under Section 393(1) is generally applied to the rent component, not the GST charged on top of it, which is why keeping room rent and GST as clearly separated line items on the invoice matters for more than just a client’s own bookkeeping. If a bill lumps a tax-inclusive figure into a single number, the client’s accounts team may end up applying TDS to an inflated base, or a hotel may end up disputing a Form 16A that does not match its own records. A clean invoice format resolves this before it becomes a reconciliation problem at quarter-end.
Is TDS applicable on an advance payment or a refundable security deposit paid before the stay?
A genuinely refundable security deposit, held against damage and returned unless it is actually used, is not rent and is not the kind of payment Section 393(1) is aimed at. An advance payment that is adjusted against the final room-rent bill is a different matter: once it is applied to rent that meets the regular-basis test, it becomes part of the taxable payment and the corporate client’s finance team may deduct TDS at the time the advance is paid rather than waiting for the final invoice, since the deduction obligation generally arises at payment or credit, whichever comes first. This is one more reason a corporate client’s accounts team, not the hotel, drives the exact timing of deduction.
In Summary
TDS on hotel room rent is narrower than most property owners assume. It only applies when a business or professional payer of a certain kind takes your rooms on a regular basis, meaning specific rooms are reserved under an agreement, and its payments to your property cross ₹50,000 in a month. When that happens, 10% TDS applies under Section 393(1), Table Serial Number 2, of the Income Tax Act, 2025, the provision that replaced the old Section 194-I from 1 April 2026.
Casual, rate-contract bookings, the kind most properties see most of the time, fall outside this entirely, regardless of volume. Banquet and event packages are usually assessed separately, under Section 393(1) Table Serial Number 6, the successor to old Section 194C, at 1% or 2%. Sharing your PAN clearly on every invoice, itemising base rent and GST separately, and reconciling your Form 26AS each year are the habits that keep this from ever becoming a real problem for your property.
This page reflects our understanding of the Income Tax Act, 2025 and related CBDT guidance as of August 2026, not personalised tax advice. Tax rates, thresholds and interpretations can change, and how they apply to your specific property depends on your own accounting and business structure. Please consult a qualified chartered accountant before relying on this information for your own tax filings or invoicing decisions.