Budget 2025: Annual limit on TDS on rent raised to Rs 6 lakh

In a significant move to ease the burden on taxpayers, Finance Minister Nirmala Sitharaman announced an increase in the threshold for Tax Deduction at Source (TDS) on rent from Rs 2.40 lakh per annum to Rs 6 lakh per annum while presenting the Union Budget 2025-26.

In her budget speech, she explained, "The annual limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh. This will reduce the number of transactions liable to TDS, thus benefiting small tax payers receiving small payments."

This change effectively raises the monthly TDS limit on rent from Rs 20,000 to Rs 50,000, providing relief to small taxpayers and simplifying compliance.

Sitharaman further emphasized the government's commitment to simplifying the tax system.

"I propose to rationalize tax deductions at source (TDS) by reducing the number of rates and thresholds about which TDS is deductible. Further, threshold amounts for tax deduction will be increased for better clarity and uniformity. The limit for tax deduction on interest for senior citizens is being doubled from the present Rs 50,000 to Rs 1,00,000," she said.

The increase in the TDS threshold on rent is part of a broader effort to streamline tax compliance. Sitharaman also mentioned that the government had decriminalized the delay in TDS payments, a measure introduced in the July 2024 budget, and this would also apply to Tax Collected at Source (TCS) provisions.

In addition to the TDS on rent revision, the government proposed other key changes in direct taxation. The annual TDS limit on interest for senior citizens has been raised from Rs 50,000 to Rs 1,00,000.

Additionally, the threshold for Tax Collected at Source (TCS) on remittances under the RBI's Liberalized Remittance Scheme (LRS) has been increased from Rs 7 lakh to Rs 10 lakh. TCS on remittances for educational purposes, where the remittance is made from a loan obtained from a financial institution, has been removed.

In another significant announcement, the government plans to introduce a new Income Tax Bill, which will be about 50% shorter in chapters and words compared to the current law.

This aims to simplify tax compliance and reduce litigation. Sitharaman also revealed that the time limit for filing updated returns for any assessment year has been extended from two years to four years, following the success of the Updated Return facility introduced in 2022.

Additionally, withdrawals from old National Savings Scheme (NSS) accounts after August 29, 2024, will be exempt from tax, providing senior citizens with further relief.

The government also proposed the removal of higher TDS/TCS provisions for non-filers of income tax returns, which will ease the compliance burden on deductors and collectors. This move aligns with the government’s broader objective of enhancing tax administration efficiency.