Major Tax Relief: New Threshold for TDS on Rent Announced in Union Budget 2025-26

Finance Minister Nirmala Sitharaman announced significant tax deductions, increasing the TDS threshold on rent and interest for senior citizens in the Union Budget 2025-26. These changes aim to ease compliance and benefit small taxpayers, while other reforms seek to simplify the tax system, enhance certainty, and reduce litigation.

In a significant move to provide relief to taxpayers, Finance Minister Nirmala Sitharaman, during her presentation of the Union Budget 2025-26, announced an increase in the threshold for Tax Deduction at Source (TDS) on rent.

The annual limit for TDS on rent has been raised from Rs 2.40 lakh to Rs 6 lakh per annum. According to Sitharaman, this adjustment will significantly reduce the number of transactions subject to TDS, providing benefits to small taxpayers receiving modest sums.

This change effectively raises the monthly threshold for TDS deductions on rent from Rs 20,000 to Rs 50,000, easing compliance burdens for small taxpayers. Sitharaman reaffirmed the government's dedication to streamlining the tax system, citing plans to rationalize tax deductions at source by reducing rates and thresholds.

Moreover, the threshold limit for tax deductions on interest meant for senior citizens will double from Rs 50,000 to Rs 1,00,000. Additionally, the government has removed the TCS on remittances for education purposes that involve loans from a financial institution, alongside increasing TCS limits under the RBI's Liberalized Remittance Scheme.

The government aims to introduce a redesigned Income Tax Bill during the budget session, anticipating it to be about 50% shorter, thus simplifying tax law for both taxpayers and administrators.

Sitharaman highlighted the extension of the deadline for filing updated tax returns from two years to four years, citing a successful uptake of the Updated Return facility.

The government also plans to exempt tax on withdrawals from old National Savings Scheme (NSS) accounts after August 29, 2024. In the broader objective of easing compliance, the proposal includes removing the stringent TDS/TCS provisions for non-filing taxpayers, making the tax administration more efficient and less burdensome.