Union Budget 2025: Govt proposes hike in threshold for TDS on rent to ₹6 lakh from ₹2.4 lakh

The government on Saturday announced its plans to increase the annual threshold for deduction of tax at source (TDS) on rent to ₹6 lakh from the existing limit of ₹2.4 lakh.

"I propose to rationalise Tax Deduction at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted. Further, threshold amounts for tax deduction will be increased for better clarity and uniformity," Finance Minister Nirmala Sitharaman said in her Budget speech.

Announcing the expansion of the limit, the FM said that this would reduce the number of transactions.

This will reduce the number of transactions subject to TDS, which will benefit small taxpayers who receive smaller payments, the finance minister added. In simpler terms, this means that this move can lead to less tax being automatically deducted from their payments, simplifying the tax process.

As per the budget document, Section 194-I of the Income Tax Act requires that any person, excluding individuals or a Hindu Undivided Family (HUF), who is responsible for paying rent should deduct income tax at the applicable rates, only when the amount of such rental income exceeds ₹2.4 lakh in a financial year.

"It is proposed to increase this threshold amount of income by way of rent for the requirement of deduction of tax at source from ₹2.4 lakh in a financial year to ₹50,000 in a month or part of a month," it added.

"There is a requirement to withhold tax on rentals paid to residents by persons other than individuals where such rental income exceeds ₹2.40 lakh per annum," said Aarti Raote, Partner at Deloitte India.

She added that this threshold is now changed to ₹50,000 per month or part of the month.

"This would mean that even if the land or machinery etc is rented for a couple of months and the rent is more than ₹50,000 then TDS requirement would trigger," Raote said.

This move to raise the annual TDS limit on rent from ₹2.40 lakh to ₹6 lakh will majorly benefit small taxpayers and landlords and ease compliance burdens, said Domnic Romell, President of CREDAI-MCHI.

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