Renting Out Your Commercial Property in Chennai: An Owner's Guide

Quick links: Tenancy law · Choosing a tenant · GST · Income tax and TDS · FAQs · Sources

If you own a shop, office or showroom in Chennai, letting it out involves more than agreeing a rent. Tamil Nadu's tenancy law, GST and income tax all apply. This guide covers what owners need to know.

This is general information, not legal or tax advice. Consult a lawyer and a chartered accountant for your situation.

The Tamil Nadu tenancy law

The Tamil Nadu Regulation of Rights and Responsibilities of Landlords and Tenants Act, 2017 covers premises let for residential, commercial or educational use (but not industrial use). Key points from the Act:

• Written agreement: premises can be let only under a written agreement, and landlord and tenant must jointly inform the Rent Authority (section 4). Verified.RealEstate reports this is done online at tenancy.tn.gov.in within 90 days of signing.
• Deposit: the security deposit can't exceed three months' rent unless the parties agree otherwise, and must be refunded within a month of the tenant vacating, less any dues (section 11).
• Rent increases: during a fixed term, rent can rise only if the agreement sets out the increase or how it's calculated (section 9). Write the escalation clause carefully.
• Eviction: only by order of the Rent Court, on grounds listed in section 21, including two months' rent arrears not paid within a month of a demand notice, sub-letting without consent, misuse after notice, and the landlord needing the premises for repairs or rebuilding.

Separately, leases of more than 11 months must be registered at the Sub-Registrar Office. See our tenant's guide to commercial leases.

Before you sign

• Check the tenant: business registration, GST number, and references from previous landlords.
• Match the use: make sure the tenant's business fits the building's approved use, or they may not get their trade licence.
• Agree the terms in writing: rent, GST, deposit, lock-in, escalation, fit-out period, maintenance, property tax, signage and restoration at the end.
• Record the handover: photographs and an inventory of fittings, signed by both sides.

GST on commercial rent

• Renting commercial property is a taxable service at 18% GST (Housing.com).
• If you're registered for GST, you charge GST on the rent.
• If you're not registered and your tenant is GST-registered, the tenant pays the GST under reverse charge (ClearTax). Since 16 January 2025, this doesn't apply when the tenant is a composition taxpayer (Notification 07/2025-Central Tax (Rate), per ClearTax).
• Registration: ClearTax notes that small landlords below the GST threshold of ₹20 lakh (₹10 lakh in special category states) don't come under these rules. Ask your CA whether you need to register.
• State in the lease whether the rent includes or excludes GST.

Income tax and TDS

• Income tax: rent is taxed as income from house property. Under the Income-tax Act, 2025, the annual value is reduced by municipal taxes you actually paid (section 21). You can then deduct 30% of the annual value and interest on a loan taken for the property (section 22).
• TDS: a business tenant paying more than ₹50,000 a month in rent deducts TDS at 10% for land and buildings before paying you, under section 393(1) (TDSMAN). Check your Form 26AS to claim credit for it.

Want to let your shop, office or showroom? List it with Jumbo Realty. We work with brands looking for commercial space across Chennai.