In the first full budget of the Modi 3.0 government, presented on February 1, 2025, Union Finance Minister Nirmala Sitharaman announced several relief measures for senior citizens. The FM proposed an increase in the tax deduction at source (TDS) limit for seniors from the current Rs 50,000 to Rs 1 lakh.
In her budget presentation, Sitharaman provided some relief to seniors. While there were demands to enhance the exemption limit and increase the deduction for medical expenses under Section 80D, the government responded by doubling the TDS threshold limit to Rs 1 lakh.
TDS Deduction Threshold For Seniors:
Sitharaman stated in her budget speech, “I propose to rationalize Tax Deduction at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted. Further, threshold amounts for tax deductions will be increased for better clarity and uniformity. The limit for a tax deduction on interest for senior citizens is being doubled from the present Rs 50,000 to Rs 1 lakh”.
At present, TDS is deducted at 10 per cent for senior citizens if there interest income is more than Rs 50,000. However, with the increase in the threshold limit, senior citizens will have some more disposable income in hand.
TDS Deduction Threshold For Rental Income:
The finance minister further announced, “Similarly, the annual limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh. This will reduce the number of transactions liable to TDS, thus benefitting small taxpayers receiving small payments”.
This will also benefit senior citizens who are dependent on the rental income as the higher threshold limit will increase their in hand income, disposable at their discretion. According to the Section 194I of the Income-tax Act, 1961, a person (except individual and HUF) paying a resident Indian a rent amount exceeding Rs 2.4 lakh in a financial year, is liable to deduct TDS from the rental payment.
Experts' Views:
Sofiya Syed, Direct Tax Division, Dewan P N Chopra & Co, says, "TDS limit for interest income increased for senior citizens from Rs 50 thousand to Rs 1 lakh u/s 194A. The TDS threshold for interest income under Section 194A has been increased to Rs 1 lakh for senior citizens. This means that banks and financial institutions will now deduct tax only if the interest earned exceeds Rs 1 lakh in a financial year, allowing senior citizens to receive a higher amount without Tax at source deduction. This change enhances their liquidity and ensures more disposable income, benefiting their financial stability and ease of cash flow".
Manoj Purohit, Partner and Leader, FS Tax, Tax and Regulatory Services, BDO India, states, "The much-needed ask from senior citizens to increase the withholding tax limit on interest income is accepted and now it is proposed to increase the threshold limit from the existing Rs 50,000 to Rs 1 lakh. This will leave a larger portion of disposable income in the hands of senior citizens, rather than them having to wait for the refund of taxes paid.”
CA Abhishek Rana, AAAR & Associates, says, "The increase in the threshold limit from Rs 50,000 to Rs 1 lakh for the purpose of deduction of TDS on interest by the banks is welcome move in this budget. This will save senior citizens from the hassles of ITR filing and claiming refunds of TDS deducted by the banks, where the interest income is up to Rs 1 Lakh".
According to CA Gaurav Makhijani, Rödl & Partner, the increase in TDS threshold streamlines the TDS for all taxpayers. He says, “The threshold for TDS on rent payments has been revised from Rs 2.4 lakh per annum to Rs 50,000 per month (effectively Rs 6.0 lakh per annum). This specific liability to deduct TDS is applicable to all taxpayers, except individuals and HUFs whose turnover from business or profession does not exceed Rs 1 crore. For such individuals and HUFs, the threshold limit was already Rs 50,000 per month on rental payments. This streamlines threshold for all taxpayers. The change simplifies compliance and rationalises the tax structure, particularly benefiting small-scale rental transactions for specified taxpayers.
