Room Rent Owner: Good news has come out for those who give houses on rent. Let us tell you that 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.
Announcement was made in the budget
While presenting the budget for the financial year 2025-26, Finance Minister Nirmala Sitharaman had announced to increase the annual limit of tax deduction at source (TDS) on rent. This will reduce the number of transactions liable for TDS, which will benefit taxpayers taking small payments. This new rule will come into effect from the first day of the new financial year i.e. April 1.
What does the rule say?
According to section 194-I of the Income Tax Act, while giving any amount to the resident as rent, income tax should be deducted at the applicable rates when the rental income exceeds Rs 2.4 lakh in a financial year. However, in 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 be applicable to individual taxpayers or HUFs only.
What does it mean?
In simple words, if land or machinery is rented for a few months and the rent is more than Rs 50,000, then TDS deduction will be mandatory. Increasing the annual TDS limit on rent to Rs 6 lakh will benefit small taxpayers and landlords on a large scale and will also reduce the compliance burden.
In simple terms, if you rent land or machinery for a few months and the rent exceeds Rs 50,000, you will need to deduct Tax Deducted at Source (TDS). However, if the annual rent amount goes up to Rs 6 lakh, this will help small taxpayers and landlords by reducing the need for TDS deductions, making the process easier for them and lowering the compliance burden.