Small taxpayers will be facilitated. Let’s find out how this new rule will benefit both the homeowner and the tenant.
The Union Budget for the financial year 2025-26 was presented in Parliament on February 25 by Union Finance Minister Nirmala Sitharaman. Fulfilling the high expectations of the middle class from this budget, Sitharaman has exempted citizens with an annual income of up to Rs 12 lakh from tax. Along with this, one of the many announcements made is that the TDS on the rent received from a house given on lease has been changed. This will be very convenient for senior citizens and those earning only from rent. The government has increased the limit of TDS on house rent from Rs 2.4 lakh per year to Rs 6 lakh. Finance Minister Sitharaman had said in her budget speech that this change will reduce the number of transactions under TDS. This will facilitate small taxpayers. Let’s find out how this new rule will benefit both the owner and the tenant of the house.
This will be the result.
Suppose you have a house on rent and you are getting more than Rs 2.4 lakh per year as rent. As per the current rules, your tenant would deduct TDS on it. Now he will give you the full amount as rent, which means you will also get the amount reduced due to TDS. The reason is that the government has capped the TDS on annual house rent at Rs 6 lakh. So the tenant will not be taxed and you will get the full amount.
So you will have to pay TDS
Now suppose, if the annual rent of the house in which a tenant lives is more than Rs 6 lakh, he will have to pay TDS and only then can the landlord be paid the rent. That is, the tenant will be responsible for paying TDS. Till FY19, the limit of exemption in TDS on house rent was Rs 1.8 lakh. Most importantly, note that 10 percent TDS will be deducted from the rent paid by the tenant who is paying more than Rs 6 lakh per year to the landlord. If the landlord does not have a PAN card, then 20 percent TDS of the rent amount will have to be paid.
Delhi and Mumbai residents will benefit
Tax experts are of the opinion that the changes made in the TDS rules in the Union Budget will benefit citizens to a large extent. The amount of house rent has increased rapidly in the last few years. Therefore, if the rent is more than Rs 20,000 per month, the tenant’s TDS is deducted. This increases compliance. Now, even if the rent is up to Rs 50,000 per month, TDS will not be deducted. Due to this change, those living in rented houses in big cities like Delhi and Mumbai will get a huge discount.