New Delhi [India], February 1 : In a major relief for taxpayers, Finance Minister Nirmala Sitharaman on Saturday announced an increase in the threshold for Tax Deduction at Source (TDS) on rent from Rs2.40 lakh per annum to Rs6 lakh per annum while presenting the Union Budget 2025-26.
Presenting the budget in Lok Sabha, the Finance Minister said, "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 effectively raises the monthly limit for TDS deduction on rent from Rs20,000 to Rs50,000, benefiting small taxpayers and easing compliance burdens.
In her her budget speech, Sitharaman emphasized the government's commitment to simplifying the tax system.
She said, "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 stated.
The new measure is aimed at reducing the number of transactions liable to TDS, making it easier for individuals and businesses that pay rent.
Sitharaman said, "In the budget of July 2024, the delay of the payments of the TDS up to the due date of filing statements was decriminalised; I propose the same from the TCS provisions as well."
Apart from the revision in TDS on rent, the government has also proposed other significant changes in direct taxation. The annual limit for TDS on interest for senior citizens has been doubled from Rs50,000 to Rs1,00,000.
Additionally, the threshold for Tax Collected at Source (TCS) on remittances under the RBI's Liberalized Remittance Scheme (LRS) has been increased from Rs7 lakh to Rs10 lakh, and TCS on remittances for education purposes, where the remittance is out of a loan from a financial institution, has been removed.
The government also announced plans to introduce a new Income Tax Bill in the budget session. The proposed bill is expected to be around 50 per cent shorter than the current law in terms of chapters and words, making it simpler for taxpayers and administrators. This move aims to enhance tax certainty and reduce litigation.
Sitharaman further highlighted that the government has extended the time limit for filing updated returns for any assessment year from two years to four years.
This change follows the success of the Updated Return facility introduced in 2022, which saw nearly 90 lakh taxpayers voluntarily updating their income by paying additional tax.
Additionally, withdrawals from old National Savings Scheme (NSS) accounts after August 29, 2024, will be exempted from tax, providing relief to senior citizens.
To further ease compliance, the government has proposed the removal of higher TDS/TCS provisions for non-filers of income tax returns. The omission of sections 206AB and 206CCA of the Income Tax Act will reduce the compliance burden on deductors and collectors, aligning with the government's broader aim of making tax administration more efficient.
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