Important Changes and Effects of the TDS on Rent Limit Increase from 2.4 Lakh to 6 Lakh
The Indian government has increased the TDS on rent threshold from 2.4 lakh to 6 lakh per annum. This move aims to reduce compliance burdens for tenants, ease cash flow for landlords, and align with rising rental costs. In this blog, we discuss the key changes, benefits, compliance requirements, and the impact on individuals and businesses.
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Overview
The annual threshold for Tax Deducted at Source (TDS) on rent was raised by the government from ₹2.4 lakh to ₹6 lakh. By lowering compliance requirements and streamlining rental transactions, this reform is anticipated to help a large number of taxpayers, especially individuals and small enterprises.
We will examine this amendment's specifics, ramifications, and effects on both landlords and tenants in this blog.
TDS on Rent: What is it?
Tenants can use the TDS on rent tax deduction method to deduct a specific proportion of their rent before paying the landlord and depositing the money with the Income Tax Department. This eliminates tax evasion and guarantees that tax responsibility is handled at the source.
Relevant Income Tax Act Sections
- Section 194-I: This section applies to people, HUFs, and companies that pay rent beyond a certain amount.
- Section 194-IB: Applied to individuals and HUFs (not subject to tax audits) who rent real estate for home or commercial use.
Key Changes in TDS on Rent Limit
| Particulars | Earlier Limit (Until FY 2023-24) | Revised Limit (FY 2024-25 Onwards) |
|---|---|---|
| TDS Threshold | ₹2,40,000 per annum | ₹6,00,000 per annum |
| Applicability | Individuals & HUFs (not subject to tax audit) | Individuals & HUFs (not subject to tax audit) |
| TDS Rate | 5% | 5% |
Why Was the Upper Limit Raised?
- To reduce the compliance burden for tenants, particularly individuals and small businesses.
- To ease cash flow for landlords who previously faced needless TDS deductions on lower rental income.
- To promote greater transparency and ease of doing business in the rental sector.
- To align with inflationary trends in major cities.
Who Gains from This Development?
1. Tenants
- No longer have to deduct and deposit TDS if renting homes for less than ₹6 lakh annually.
- Minimizes the administrative burden of submitting TDS returns (Form 26QC).
2. Landlords
- Landlords receiving rent under ₹6 lakh per year are paid in full, with no TDS withheld.
- If the tax burden is small, landlords don't need to seek TDS refunds.
3. Small Enterprises
- Businesses renting spaces under ₹6 lakh annually enjoy reduced tax compliance.
Example for Better Understanding
| Scenario | Annual Rent (₹) | TDS Applicability | TDS Deduction (₹) |
|---|---|---|---|
| Case 1 | 5,40,000 | No TDS applicable | ₹0 |
| Case 2 | 6,00,000 | TDS applicable | ₹30,000 (5%) |
| Case 3 | 7,20,000 | TDS applicable | ₹36,000 (5%) |
Conclusion
Raising the TDS threshold on rent from ₹2.4 lakh to ₹6 lakh is a positive move, reducing compliance burdens for tenants and landlords. However, tenants paying rent above ₹6 lakh must ensure timely TDS deduction and deposit.
For professional tax advice and TDS compliance assistance, visit myITRonline today!
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Krishna Gopal Varshney
An editor at apnokacaKrishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.
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Krishna Gopal Varshney
An editor at Myitronline
Krishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.
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