Section 194-I of the Income-tax Act requires non-individual entities paying rent to a resident to deduct tax at source when the total rent exceeds Rs. 2,40,000 annually. The Finance Bill 2025 proposes an amendment to increase the threshold for tax deduction from Rs. 2,40,000 per year to Rs. 50,000 per month (or part of a month). Under this amendment, tax will only need to be deducted if the monthly rent exceeds Rs. 50,000, simplifying the tax deduction process for landlords and tenants. This change is scheduled to take effect from April 1, 2025.
Budget 2025: Section 194-I – Rent
Section 194-I of the Act requires that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall deduct income-tax at the rates as specified therein, only when the amount of such rental income exceeds Rs. 2,40,000/- in a financial year.
2. It is proposed to increase this threshold amount of income by way of rent for requirement of deduction of tax at source under section from Rs. 2,40,000/- in a financial year to Rs. 50,000/- in a month or part of a month.
3. This amendment will take effect from the 1st day of April 2025.
[Clause 59]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 59 of the Bill seeks to amend section 194-I of the Income-tax Act relating to rent.
The said section 194-I, inter alia, provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax at the rates specified therein.
The first proviso to the said section provides that no deduction shall be made under this section where the amount of such income does not exceed two hundred and forty thousand rupees during the financial year.
It is proposed to substitute the first proviso to the said section so as to provide that no deduction of tax at source shall be made under this section where the income by way of rent credited or paid for a month or part of a month by the aforesaid person to the account of, or to, the payee, does not exceed fifty thousand rupees.
This amendment will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
59. Amendment of section 194-I
In section 194-I of the Income-tax Act, for the first proviso, the following proviso shall be substituted, namely:––
“Provided that no deduction shall be made under this section, where the income by way of rent credited or paid for a month or part of a month by such person to the account of, or to, the payee, does not exceed fifty thousand rupees:”.
TDS is applicable if and only if the rent exceeds Rs. 50,000.00 and not Rs. 50,000.00 as mentioned in the article.
“Provided that no deduction shall be made under this section, where the income by way of rent credited or paid for a month or part of a month by such person to the account of, or to, the payee, does not exceed fifty thousand rupees:”.
So rent shoudl be atleast Rs. 50,001.00 to attract TDS provisions. Your opinion please.
By way of this TDS the house owner is subject to double jeopardy. This is because while the tenant already deducts the tax and pays to the authority, why the Taxing authority has to collect Income Tax for the same Rental Income? is it not an unconstitutional procedure?
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