Last reviewed: 25 September 2026. Rent is where GST catches out more landlords and tenants than almost any other item — because the answer changes with the type of property, whether the landlord is registered, whether the tenant is registered, and what the premises are used for. Two rule changes made it trickier: since 10 October 2024 a registered tenant must pay GST under reverse charge on commercial rent paid to an unregistered landlord, and since 16 January 2025 composition taxpayers stand excluded from that reverse charge. This guide sets out the current position for FY 2026-27 with tables, worked examples and the TDS overlay. Income-tax references for rent paid from 1 April 2026 use the Income-tax Act, 2025, with the old 1961 section in brackets; rent paid up to 31 March 2026 stays under the 1961 Act.
The four questions that decide GST on any rent
Before applying a rate, answer these in order: (1) Is the property a residential dwelling used as a residence, or anything else (shop, office, godown, factory, land for commerce)? (2) Is the landlord registered under GST? (3) Is the tenant registered? (4) What is the actual use? The same flat rented as a residence and rented as an office get opposite answers. Everything below follows from this matrix.
GST on commercial property rent: 18% under forward charge
Renting of immovable property other than a residential dwelling — offices, shops, showrooms, godowns, industrial sheds, land leased for business — is a taxable service under SAC 997212, chargeable at 18% with full ITC to the landlord. The September 2025 GST rate overhaul left this rate unchanged. A registered landlord issues a tax invoice, charges CGST+SGST (or IGST for an inter-State supply), reports the supply in GSTR-1 and pays it through GSTR-3B. If the landlord's aggregate turnover exceeds ₹5 crore, rent invoices to registered tenants must also be e-invoiced — see our guide on e-invoicing thresholds for FY 2026-27.
Charges recovered along with rent — maintenance, municipal taxes passed on, amenity charges — generally form part of the taxable value unless recovered strictly as a pure agent. Draft the rent agreement so each recovery is named and its treatment is clear.
Unregistered landlord, registered tenant: RCM since 10 October 2024
Until October 2024, an unregistered landlord (below the ₹20 lakh threshold) meant no GST on the transaction. That changed with Entry 5AB of Notification 13/2017-CT(Rate), inserted by Notification 09/2024-CT(Rate): from 10 October 2024, renting of any property other than a residential dwelling by an unregistered person to a registered person shifts the tax to the tenant under reverse charge. The registered tenant self-assesses 18% on the rent, pays it in cash and claims ITC if otherwise eligible.
Relief for small tenants: composition taxpayers (many small traders, manufacturers and restaurants) were taken out of Entry 5AB by Notification 07/2025-CT(Rate) with effect from 16 January 2025, and the GST Council recommended regularising the period from 10 October 2024 to 15 January 2025 on an as-is basis. A regular-scheme tenant renting a shop from an individual unregistered landlord, however, must run RCM every month without exception.
GST on residential property rent
Renting of a residential dwelling for use as a residence is exempt (Sl. No. 12 of Notification 12/2017-CT(Rate), as amended) — but only fully so when the tenant is unregistered. The layers:
- Tenant unregistered: exempt, regardless of rent amount or the landlord's registration.
- Tenant registered: the tenant pays 18% under RCM (Entry 5AA, effective 18 July 2022) — typically companies, LLPs and firms taking flats for employees or guest use, or registered proprietors renting in the business's books.
- Proprietor's own home: a registered proprietor renting a dwelling in his personal capacity, for his own residence and not on account of the business pays no GST (carve-out effective 1 January 2023 via Notification 15/2022-CT(Rate)).
- Used as anything other than a residence (branch office in a flat, storage, clinic): the exemption is lost — the supply is taxed like commercial renting, including Entry 5AB where the landlord is unregistered.
Note: hostels, paying-guest set-ups and serviced accommodation are judged on their own facts — a separate conditional exemption exists for certain long-stay hostel accommodation, so do not assume the residential-dwelling exemption automatically covers them.
Who pays what: decision matrix
| Property & use | Landlord | Tenant | GST position |
|---|---|---|---|
| Commercial (office/shop/godown) | Registered | Any | 18% forward charge — landlord invoices and pays |
| Commercial | Unregistered | Registered (regular scheme) | 18% RCM on tenant (Entry 5AB, from 10-10-2024) |
| Commercial | Unregistered | Composition taxpayer | No RCM from 16-01-2025 (Notification 07/2025-CT(Rate)) |
| Commercial | Unregistered | Unregistered | No GST — no registered person in the chain |
| Residential dwelling, used as residence | Any | Unregistered | Exempt |
| Residential dwelling, used as residence | Any | Registered | 18% RCM on tenant (Entry 5AA) — except proprietor renting personally for own residence |
| Residential dwelling, used for business | Any | Any | Taxable like commercial renting — exemption lost |
Worked examples
1. Registered landlord, company tenant (forward charge). A Thane landlord registered under GST rents an office to a private limited company at ₹1,00,000 per month. Invoice: ₹1,00,000 + ₹18,000 GST = ₹1,18,000. The company claims ₹18,000 as ITC. Since rent exceeds ₹50,000 per month, the company also deducts TDS under section 393(1) Table S.No. 2(ii) (old 194-I) at 10% on ₹1,00,000 (not on ₹1,18,000) = ₹10,000, paying the landlord ₹1,08,000 net.
2. Unregistered individual landlord, registered trader tenant (RCM). A trader on the regular scheme rents a shop from an unregistered individual at ₹40,000 per month. The landlord raises no tax invoice. The trader books RCM of ₹7,200 (18% of ₹40,000) each month, issues a self-invoice, pays the ₹7,200 in cash through GSTR-3B Table 3.1(d), and claims it back as ITC in Table 4(A)(3). No income-tax TDS applies, as ₹40,000 does not exceed the ₹50,000-per-month threshold.
3. Company takes a flat for an employee (residential RCM). A company rents a 2BHK from an unregistered owner at ₹30,000 per month for its manager's residence. Entry 5AA applies: the company pays ₹5,400 under RCM. ITC is generally not available, as the use is the employee's personal residence — so the ₹5,400 is a real monthly cost worth pricing into the arrangement.
When must a landlord register?
- Registration is required once aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in special category states). Aggregate turnover under Section 2(6) of the CGST Act includes exempt supplies — residential rent, commercial rent and professional receipts all count together. The Explanation to the third proviso to Section 22(1), which leaves out exempt interest on deposits, loans or advances, applies only when testing whether a supplier deals exclusively in goods for the higher goods-only limit. It does not take interest out of a landlord's aggregate turnover generally.
- A person making only exempt supplies — for example, letting out flats purely as residences to unregistered tenants — is not liable to register at all, whatever the amount.
- Rent that suffers tax wholly in the tenant's hands under RCM does not by itself compel the landlord to register.
- Crossed the limit but never registered? Regularise before a notice arrives — back-tax with interest under Sections 73/74 is an expensive way to learn the threshold.
ITC on rent: what the tenant and landlord can claim
- Tenant (forward charge): ITC on office, shop or godown rent is available where the premises are used for business and the supply is not blocked — see our guide to blocked ITC under Section 17(5).
- Tenant (RCM): the RCM liability must be discharged in cash — it cannot be paid from the credit ledger. A self-invoice must be issued within 30 days of receipt of supply (Rule 47A, effective 1 November 2024). The tax then comes back as ITC in the same or a later return, subject to eligibility.
- Landlord: can claim ITC on brokerage, repairs, maintenance and professional fees relating to the taxable renting. ITC on the cost of constructing the building remains blocked under Section 17(5)(c)/(d) in most cases.
- Employee accommodation: GST paid on flats for employees' residence is generally treated as personal consumption — do not route it into the ITC pool without specific advice.
TDS on rent: the income-tax overlay
GST and TDS run in parallel — paying one never excuses the other. For rent paid or credited from 1 April 2026, the rent TDS rows sit in section 393(1) of the Income-tax Act, 2025; rent paid up to 31 March 2026 stays under Sections 194-I/194-IB of the 1961 Act. See our old-to-new TDS section mapping.
| Provision (2025 Act, old section) | Who deducts | Threshold | Rate |
|---|---|---|---|
| Section 393(1) Table S.No. 2(ii) (old 194-I) | Businesses and professionals (other than small individuals/HUFs) | Rent above ₹50,000 per month or part of a month | 10% — land/building/furniture; 2% — plant & machinery |
| Section 393(1) Table S.No. 2(i) (old 194-IB) | Individuals/HUFs not covered by the S.No. 2(ii) row | Rent above ₹50,000 per month | 2% |
| Section 393(2) (old 195) | Any tenant paying a non-resident landlord | No threshold | Rates in force for non-residents (30% plus cess for an individual NRI), or the rate in a lower deduction certificate |
Deduct TDS on the rent excluding GST where the GST component is shown separately in the invoice or agreement (CBDT Circular 23/2017). That circular was issued under the 1961 Act; section 536(2)(j) of the 2025 Act keeps existing circulars and notifications in force as if issued under the corresponding new provision, so the same approach applies to section 393 deductions. On the income-tax side of letting property, see our guide to house property income and home-loan deductions.
NRI landlords renting commercial premises in India
When the landlord is a non-resident, the tenant's TDS changes completely. Rent paid to an NRI is not covered by the resident rent rows; it falls under section 393(2) (old 195), with no ₹50,000 threshold and at the rates in force for non-residents. For an individual NRI that is generally 30% plus 4% cess on the full rent (31.2% before any surcharge). The tenant needs a TAN, files the non-resident TDS return and issues the TDS certificate. The NRI can apply for a lower deduction certificate under section 395(1)(a) (old 197) if the expected tax on the year's income is lower.
On GST, the same matrix applies. If the NRI landlord is unregistered and the tenant is registered, the tenant pays 18% under Entry 5AB. An NRI earning substantial commercial rent should check the registration position before the tenant raises it. The net rent is credited to the NRO account and can be remitted abroad after tax, using the Form 15CA/15CB process.
| ₹1,00,000 monthly office rent | Resident landlord | NRI landlord |
|---|---|---|
| TDS provision | Section 393(1) S.No. 2(ii) (old 194-I) | Section 393(2) (old 195) |
| TDS rate | 10% | 31.2% (30% + 4% cess) |
| Monthly TDS | ₹10,000 | ₹31,200 |
| Net paid to landlord (before GST) | ₹90,000 | ₹68,800 |
| Annual TDS | ₹1,20,000 | ₹3,74,400 |
If the NRI's actual tax on the year's rent is lower, a lower deduction certificate or a refund through the ITR brings the difference back. We handle this for NRI landlords through our CA services for NRIs; see also our NRI tax hub.
Common mistakes we keep seeing
- Assuming an unregistered landlord means no GST anywhere — Entry 5AB moved that tax to the registered tenant from 10 October 2024.
- Composition dealers still paying rent RCM after 16 January 2025 — or regular-scheme tenants wrongly borrowing that exclusion.
- Paying RCM by debiting the credit ledger. RCM is a cash-only payment; set-off against ITC invites demand with interest.
- Skipping the self-invoice — without it, the RCM ITC claim is documentarily weak in scrutiny.
- Applying the residential exemption to a flat used as an office, or to guest houses and serviced stays, on label rather than use.
- Counting only taxable rent towards the ₹20 lakh registration threshold, when exempt rent counts too.
- Deducting TDS on the GST-inclusive amount.
- Deducting 10% on rent paid to an NRI landlord, when section 393(2) (old 195) applies.
- Claiming ITC on employee residential accommodation as a matter of course.
Compliance checklist
Landlords: map every property to the matrix above; watch aggregate turnover (including exempt rent) against ₹20 lakh; issue proper tax invoices with SAC 997212; report B2B rent in GSTR-1; e-invoice if turnover exceeds ₹5 crore; word recoveries (maintenance, taxes) deliberately in the agreement.
Tenants: confirm the landlord's GSTIN status and residential status in writing; diarise monthly RCM where the landlord is unregistered; issue self-invoices within 30 days; pay RCM in cash and claim ITC in Table 4(A)(3); run the ₹50,000-per-month TDS test each month (or apply section 393(2) for an NRI landlord); keep rent agreements, payment proofs and self-invoices in one file per property.
Frequently asked questions
Is GST payable on rent of residential property?
Renting a residential dwelling for use as a residence is exempt from GST when the tenant is not GST-registered, whatever the rent amount. If the tenant is a registered person, the tenant pays 18% under reverse charge (Entry 5AA of Notification 13/2017-CT(Rate), inserted from 18 July 2022). Exception: a registered proprietor who rents a dwelling in his personal capacity, for his own residence and not for the business, pays no GST (effective 1 January 2023).
Who pays GST on commercial rent if the landlord is unregistered?
Since 10 October 2024, when an unregistered landlord rents out property other than a residential dwelling to a GST-registered tenant, the tenant must pay 18% GST under reverse charge (Entry 5AB, inserted by Notification 09/2024-CT(Rate)). Composition taxpayers were carved out of this RCM from 16 January 2025 by Notification 07/2025-CT(Rate); the GST Council recommended regularising the intervening period on an as-is basis.
What is the GST registration limit for rental income?
A landlord must register when aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in special category states). Aggregate turnover under Section 2(6) of the CGST Act counts exempt supplies too, so residential and commercial rent both count towards the limit. The Explanation to the third proviso to Section 22(1), which ignores exempt interest on deposits, loans or advances, applies only when deciding whether a supplier deals exclusively in goods for the higher goods-only limit; it is not a general exclusion for landlords. A person making only exempt supplies (say, purely residential rent to unregistered tenants) is not required to register at all, and rent taxed fully in the tenant’s hands under RCM does not by itself force the landlord to register.
Can a tenant claim ITC on rent and on GST paid under RCM?
Yes, if the premises are used for business and the credit is not blocked under Section 17(5). GST paid under reverse charge must be paid in cash (it cannot be set off against ITC), after which the tenant claims it as ITC in Table 4(A)(3) of GSTR-3B, supported by a self-invoice. ITC on a flat taken for an employee’s residence is generally not available, as it is treated as personal consumption.
Is TDS deducted on rent in addition to GST?
Yes, income-tax TDS is a separate obligation. For payments from 1 April 2026 (tax year 2026-27), TDS on rent above ₹50,000 per month or part of a month falls under section 393(1) Table S.No. 2(ii) of the Income-tax Act, 2025 (old 194-I) at 10% for land, building or furniture and 2% for plant and machinery. Individuals and HUFs outside that row deduct 2% above ₹50,000 per month under section 393(1) Table S.No. 2(i) (old 194-IB). Rent paid up to 31 March 2026 stays under the 1961 Act sections. TDS is deducted on the rent excluding GST where GST is shown separately. Rent paid to a non-resident landlord is covered by section 393(2) (old 195) instead, with no threshold.
How much TDS applies on rent paid to an NRI landlord?
Rent paid to a non-resident landlord falls under section 393(2) of the Income-tax Act, 2025 (old section 195), not the resident rent row. For an individual NRI, TDS is generally 30% plus 4% cess (31.2%, before any surcharge) on the full rent, with no ₹50,000 threshold. The NRI can apply for a lower deduction certificate under section 395(1)(a) (old 197). The net rent is credited to the NRO account and can be remitted abroad with the Form 15CA/15CB process.
Is GST charged on security deposits for rented property?
A refundable security deposit is not consideration for the supply, so no GST applies when it is collected. If the deposit is later adjusted against rent or forfeited (for damage, lock-in breach or unpaid dues), it becomes consideration at that point and GST applies on the amount adjusted or retained, at the rate applicable to the underlying renting.
We advise landlords and tenants on GST applicability, RCM set-up, registration timing, ITC positions and TDS on rent — with documentation that stands up in scrutiny. Based in Thane; serving clients across India.
GST Compliance & Advisory TDS Compliance Talk to usThis article is a general summary of the GST and TDS position on renting of immovable property as on 25 September 2026 (FY 2026-27) and is not professional advice for any specific transaction. Rates, notifications and thresholds change; positions on hostels, mixed-use premises and ITC can turn on facts. Take specific advice before acting. Key references: CGST Act Sections 2(6) and 22; Notifications 13/2017-CT(Rate) (Entries 5AA/5AB), 12/2017-CT(Rate) Sl. No. 12, 05/2022-CT(Rate), 15/2022-CT(Rate), 09/2024-CT(Rate), 07/2025-CT(Rate); Rule 47A; sections 393(1), 393(2), 395(1)(a) and 536(2)(j) of the Income-tax Act, 2025 (old Sections 194-I, 194-IB, 195 and 197).