On February 1, while presenting the budget for the financial year 2025-26, Finance Minister Nirmala Sitharaman announced increasing the annual limit of TDS (tax deduction at source) on rent.
If you rent out a house, then there is good news for you. Actually, the central government has increased the limit of tax deduction on income earned from rented property from the current Rs 2.4 lakh per annum to Rs 6 lakh. On February 1, Finance Minister Nirmala Sitharaman, while presenting the budget for the financial year 2025-26, announced to increase the annual limit of TDS (tax deduction at source) on rent. This will reduce the number of transactions liable for TDS, which will benefit taxpayers receiving small payments. This new rule will come into effect from the first day of the new financial year i.e. April 1.
What do the rules say
According to section 194-I of the Income Tax Act, income tax should be deducted at the applicable rates while paying any amount as rent to a resident, if the rental income exceeds Rs 2.4 lakh in a financial year. However, in the Budget 2025-26, it has been proposed to increase this tax deduction limit of income in the form of rent to Rs 50,000 per month. This provision will apply to individual taxpayers or HUFs apart from HUFs.
What does it mean
In simple terms, if land or machinery etc. is rented for a few months and the rent is more than Rs 50,000, then TDS deduction will be necessary. Raising the annual TDS limit on rent to Rs 6 lakh will greatly benefit small taxpayers and landlords and will also reduce the compliance burden.
Let us tell you that while presenting the general budget on February 1, Finance Minister Nirmala Sitharaman made many big announcements for taxpayers. Nirmala Sitharaman had increased the tax exemption limit from Rs 7 lakh to Rs 12 lakh under the new regime. At the same time, there were many changes in the tax slab as well. Apart from this, there were some other changes including TDS.
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