Commercial Rental Agreement Format
A shop/office rental agreement format with lock-in, rent escalation, GST-on-rent and TDS clauses — the points a residential format misses.
Renting premises for a business raises questions a residential agreement never faces: who bears the GST on rent, whether the tenant must deduct TDS before paying, how long the lock-in binds both sides, and what happens to the tenant's fit-outs and signage at exit. A commercial rental agreement settles each of these in writing before the business moves in.
The format below covers a standard shop or office tenancy with an annual escalation and a lock-in period. Execute it on stamp paper of the value your state prescribes for commercial leases; a term of twelve months or more must be registered under the Registration Act, 1908, and several states require registration of business tenancies regardless of term.
When to use this format
- Taking a shop, office or godown on rent for business use
- Letting out commercial premises with an escalation and lock-in
- Recording who bears GST on rent and how TDS under Section 194-I is handled
- Documenting fit-out, signage and restoration obligations before possession
Key clauses and what they do
- Parties & premises
- Identifies the landlord, the tenant entity and the exact premises with permitted business use.
- Term & lock-in
- Fixes the tenancy period and the lock-in during which neither side can exit without paying the balance rent.
- Rent & escalation
- States the monthly rent, the due date and the annual escalation percentage.
- GST on rent
- Records that GST applies on commercial rent where the landlord is registered, and who bears it.
- TDS under 194-I
- Requires the tenant to deduct tax at source on rent where the law requires and furnish the certificate.
- Fit-outs & signage
- Permits the tenant's interiors and board subject to approvals, with restoration at exit.
- Repairs & outgoings
- Splits maintenance, property tax and society charges between the parties.
- Termination & handover
- Notice after lock-in, and vacant possession with fittings restored, wear and tear excepted.
The format
Replace every [BRACKETED] detail with your own before use.
COMMERCIAL RENTAL AGREEMENT
(Shop / office premises)
This Commercial Rental Agreement ("Agreement") is executed at [CITY]
on this [DAY] day of [MONTH], [YEAR]
BETWEEN
[FULL NAME OF LANDLORD], son/daughter/wife of [FATHER'S / HUSBAND'S
NAME], residing at [ADDRESS OF LANDLORD] (the "LANDLORD") of the ONE
PART;
AND
[NAME OF TENANT / ENTITY], a [PROPRIETORSHIP / PARTNERSHIP / LLP /
PRIVATE LIMITED COMPANY] having its office at [ADDRESS], represented
by its [PROPRIETOR / PARTNER / DIRECTOR] [NAME] (the "TENANT") of
the OTHER PART.
WHEREAS the Landlord is the owner of the premises bearing [SHOP /
OFFICE NO., FLOOR, BUILDING, STREET, CITY, STATE, PIN], admeasuring
about [AREA] sq. ft. (the "Premises"), and has agreed to let the
Premises to the Tenant for the business of [NATURE OF BUSINESS] on
the terms below.
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:
1. TERM AND LOCK-IN
The tenancy shall be for [11 MONTHS / NUMBER YEARS] commencing on
[COMMENCEMENT DATE]. The first [NUMBER] months shall be a lock-in
period during which neither party may terminate; a party exiting
within the lock-in shall pay the rent for the unexpired lock-in
period.
2. RENT AND ESCALATION
The Tenant shall pay monthly rent of Rs. [AMOUNT]/- (Rupees
[AMOUNT IN WORDS] only), in advance on or before the [DAY] of
each month by [BANK TRANSFER / CHEQUE]. The rent shall stand
enhanced by [5 / NUMBER]% on the expiry of every [12] months.
3. GST AND TDS
(a) Where the Landlord is registered under GST, GST on the rent
shall be charged in the Landlord's tax invoice and borne by
[THE TENANT].
(b) The Tenant shall deduct tax at source from the rent where
required under Section 194-I of the Income-tax Act, 1961 and
furnish the TDS certificate to the Landlord; rent so deducted
and deposited shall be treated as rent paid.
4. SECURITY DEPOSIT
The Tenant has paid an interest-free refundable security deposit
of Rs. [AMOUNT]/- (Rupees [AMOUNT IN WORDS] only), refundable
within [NUMBER] days of the Tenant vacating, after deducting
arrears, unpaid outgoings and the cost of restoring the Premises
beyond normal wear and tear.
5. USE OF PREMISES
The Premises shall be used only for the lawful business of
[NATURE OF BUSINESS]. The Tenant shall obtain and maintain all
licences and registrations its business requires and shall not
store hazardous or prohibited goods.
6. FIT-OUTS AND SIGNAGE
The Tenant may carry out interior fit-outs and display its board
at the Premises with the Landlord's prior written consent and
subject to local body rules. On exit the Tenant shall remove its
fit-outs and signage and restore the Premises to its original
condition, wear and tear excepted.
7. REPAIRS AND OUTGOINGS
Day-to-day repairs shall be borne by the Tenant and structural
repairs by the Landlord. Electricity and water shall be paid by
the Tenant per the meters; [SOCIETY / COMMON AREA] maintenance
shall be borne by [THE TENANT / THE LANDLORD]; property tax shall
remain the Landlord's liability.
8. SUB-LETTING
The Tenant shall not sub-let, assign or part with possession of
the Premises without the Landlord's prior written consent.
9. TERMINATION
After the lock-in, either party may terminate by [TWO / THREE]
months' written notice. On expiry or termination the Tenant shall
hand over vacant possession with the Landlord's fittings intact.
10. STAMP DUTY AND REGISTRATION
Stamp duty on this Agreement shall be borne by [THE TENANT /
BOTH PARTIES EQUALLY]. The parties note that a lease of twelve
months or more requires registration under the Registration
Act, 1908.
IN WITNESS WHEREOF the parties have signed this Agreement on the
day, month and year first above written.
LANDLORD TENANT
Signature: ____________________ Signature: ____________________
Name: [LANDLORD NAME] For [ENTITY NAME]
Name & designation: [NAME]
WITNESSES
1. Name: ______________________ Signature: _________________
2. Name: ______________________ Signature: _________________General format for reference — get it professionally drafted for your specific case.
Stamp duty on commercial tenancies is higher than residential in most states, and some states (for example Maharashtra, for leave-and-licence) require registration regardless of term. GST and TDS positions depend on the landlord's registration status and the rent amount — have the final draft vetted for your state and figures.
Need this drafted for your exact situation?
A practising advocate drafts the document around your facts, your state's stamp and registration rules, and the clauses that actually protect you — with execution guidance included.
Frequently asked questions
Is GST always payable on commercial rent?
GST at 18% applies on renting of commercial property when the landlord's aggregate turnover (including the rent) crosses the registration threshold and the landlord is registered. An unregistered small landlord charges no GST. The clause should state who bears it if it applies.
When must the tenant deduct TDS on rent?
Under Section 194-I, a tenant paying rent above the statutory threshold (₹50,000 for a month for FY 2026-27) deducts TDS at 10% on land/building rent. Individuals not under tax audit fall instead under Section 194-IB at its own rate and threshold. The agreement should oblige the deductor to furnish TDS certificates.
What does a lock-in period actually do?
It makes the tenancy firm for a minimum period: a tenant leaving early pays rent for the unexpired lock-in, and a landlord evicting early compensates similarly. Courts generally enforce reasonable lock-ins in commercial leases, which is why the clause states the consequence expressly.
Can I register my company or GST at rented premises?
Yes — with the rent agreement plus the landlord's no-objection certificate and a recent utility bill. If you intend to use the premises as a registered office or principal place of business, say so in the use clause and obtain the NOC at signing.
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