TDS on Rent: Key Changes Landlords Need to Know (2024-25)
With the financial year drawing to a close, it’s crucial for landlords to stay updated on the latest tax regulations. Recent changes to Tax Deducted at Source (TDS) on rental income can significantly impact your tax obligations. This article breaks down the key updates you need to be aware of.
Understanding TDS on Rent
TDS, or Tax Deducted at Source, is a system where a portion of income is deducted as tax at the source of income. In the context of rent, this means the tenant deducts tax from the rent paid to the landlord and deposits it with the government.
TDS on Rent: The Recent Relief
The government has provided some relief to landlords by increasing the threshold for TDS on rent. Previously, TDS was applicable if the annual rent exceeded ₹2.4 lakh. Now,
- The threshold for TDS on rent has been increased to ₹6 lakh per annum.
- This means if your annual rental income is less than ₹6 lakh, TDS will not be deducted.
This change primarily benefits smaller landlords and those with lower-rent properties, reducing their tax-related administrative burden.
Benefits of the TDS on Rent Change
The increased threshold offers several advantages:
- Reduced Tax Burden: Landlords with rental income below ₹6 lakh annually are exempt from TDS.
- Simplified Compliance: Less paperwork and fewer tax deposits for both landlords and tenants.
- Easier Rental Transactions: Tenants find it easier to rent properties with monthly rents up to approximately ₹50,000 without TDS complexities.
TDS on Rent: Section 194-I of the Income Tax Act
TDS on rental income is governed by Section 194-I of the Income Tax Act. This section outlines the rules and regulations for deducting tax at source on rent payments.
TDS on Rent: Applicable TDS Rates
The TDS rates depend on the nature of the rented property:
- 10% TDS: Applicable on rent for land, buildings, or furniture.
- 2% TDS: Applicable on rent for machinery or equipment.
TDS on Rent: Impact on Salaried Employees
Salaried individuals also benefit from changes in the tax regime. Under the new tax regime, income up to ₹12 lakh is effectively tax-free (excluding special-rate income). With the standard deduction of ₹75,000, the tax-free limit for salaried taxpayers effectively becomes ₹12.75 lakh.
Staying Compliant with TDS on Rent
To ensure compliance with TDS regulations, landlords should:
- Accurately assess their annual rental income.
- Understand the applicable TDS rates based on the type of property rented.
- Maintain proper records of rental income and TDS deductions.
By staying informed and adhering to the updated TDS rules, landlords can navigate their tax obligations effectively and avoid potential penalties.
