TDS Threshold Changes for FY 2025-26
The Finance Act 2025 raised several TDS thresholds with effect from FY 2025-26, cutting the number of small payments that get caught by withholding. The headline reliefs are for rent, where the Section 194I annual threshold jumped from Rs 2,40,000 to Rs 6,00,000, and for professional and technical fees, where the Section 194J threshold rose from Rs 30,000 to Rs 50,000. The rates themselves were largely left alone. What moved was the entry point at which deduction begins.
Key Takeaways
- Section 194I (rent): annual threshold raised from Rs 2,40,000 to Rs 6,00,000 (Rs 50,000 per month). Rate unchanged at 10% for land, building or furniture and 2% for plant and machinery.
- Section 194IB (rent by individuals/HUF not under audit): rate reduced from 5% to 2%.
- Section 194J (professional and technical fees): threshold raised from Rs 30,000 to Rs 50,000 per year. Rates unchanged at 10% professional, 2% technical.
- Section 194A (interest other than securities): thresholds revised upward, with a specific increase for senior citizens' bank and post office interest.
- The relief is in the thresholds, not the rates. Deductors must reconfigure their systems to apply the new limits from FY 2025-26.
This piece explains what changed and who benefits. If you need the complete section-by-section rate schedule instead, use our TDS rate chart for FY 2026-27. Here the focus is narrower: the Budget 2025 threshold hikes that took effect from FY 2025-26.
Why Budget 2025 Moved the Thresholds
Many TDS thresholds had been static for years while rents, professional fees and deposit balances rose with inflation. The practical effect was that withholding reached down into small, routine payments, locking up cash for landlords, professionals and depositors who then had to wait until they filed their return to reclaim the excess. Budget 2025 rationalised these limits to reduce the compliance burden and the cash-flow lock-up, so that only genuinely substantial payments trigger deduction.
The design choice is deliberate. Rather than cut rates, which would reduce the credit available to the deductee, the government lifted the entry thresholds. A payment below the new limit escapes TDS entirely, so the payee receives the full amount and the deductor is spared the filing obligation on small sums. The credit mechanics for larger payments stay exactly as before.
Before vs After: The Threshold Changes
The table below sets out the four sections that moved, comparing the old position with the FY 2025-26 position.
Comparison
TDS Thresholds: Before vs FY 2025-26
What the Finance Act 2025 changed, and what stayed the same
| Parameter | Up to FY 2024-25 | From FY 2025-26 |
|---|---|---|
| 194I Rent (annual threshold) | Rs 2,40,000 | Rs 6,00,000 (Rs 50,000/month) |
| 194I Rate | 10% / 2% | 10% land, building, furniture; 2% plant and machinery |
| 194IB Rent (individual/HUF, no audit) | Rate 5% | Rate reduced to 2% |
| 194J Professional/technical fees | Rs 30,000/year | Rs 50,000/year |
| 194J Rate | 10% / 2% | 10% professional, 2% technical |
| 194A Interest (senior citizens) | Lower threshold | Raised for senior citizens |
Takeaway: The relief sits almost entirely in the thresholds. Rates under 194I and 194J are unchanged; only 194IB saw a rate cut, from 5% to 2%.
Source: Finance Act 2025; effective FY 2025-26
Rates largely held, thresholds moved. With the single exception of Section 194IB, where the rate fell from 5% to 2%, the Budget 2025 reliefs did not touch TDS rates. Section 194I stays at 10% and 2%, and Section 194J stays at 10% and 2%. If you are budgeting for a deduction above the new threshold, the amount withheld per rupee is the same as last year. What changed is whether the payment crosses the line into TDS territory at all.
Section 194I: Rent Paid by Businesses
Section 194I governs TDS on rent paid by businesses and by anyone whose accounts are subject to tax audit. The annual threshold has been raised from Rs 2,40,000 to Rs 6,00,000, which works out to Rs 50,000 per month. Below this limit, no TDS is deducted on rent.
The rates are unchanged: 10% on rent for land, building or furniture and fittings, and 2% on rent for plant and machinery. The effect of the higher threshold is that a great many small commercial tenancies, shared offices, equipment hires and short leases now fall outside TDS entirely. A business paying Rs 45,000 a month in rent, which is Rs 5,40,000 a year, would have deducted TDS under the old Rs 2,40,000 threshold but deducts nothing under the new Rs 6,00,000 limit. For the full mechanics of rent TDS, including the interaction with the tenant's audit status, see our guide to TDS on rent under Sections 194I and 194IB.
Section 194IB: Rent Paid by Individuals and HUF
Section 194IB applies to individuals and Hindu Undivided Families who are not liable to tax audit and who pay monthly rent above Rs 50,000. Here the change is a rate cut, from 5% to 2%, rather than a threshold move.
This is the one place in the Budget 2025 rent reliefs where the rate itself came down. A salaried tenant paying Rs 70,000 a month to a landlord, who is required to deduct under 194IB, now withholds at 2% instead of 5%. That leaves more cash with the landlord through the year and reduces the amount the tenant has to deposit and report. The lower rate also softens the cash-flow impact for high-rent residential arrangements in metro cities.
Section 194J: Professional and Technical Fees
Section 194J covers TDS on fees for professional services and for technical services. The annual threshold has been raised from Rs 30,000 to Rs 50,000 per year, per payee, per category.
The rates are unchanged: 10% for professional services, such as fees paid to lawyers, doctors, chartered accountants, architects and consultants, and 2% for technical services. The higher threshold means small, one-off engagements, a single consultancy assignment or a modest annual retainer, now sit below the deduction line. A business paying a consultant Rs 45,000 in the year deducted TDS under the old Rs 30,000 threshold but deducts nothing under the new Rs 50,000 limit. Our guide to TDS on professional and technical fees under Section 194J works through the professional-versus-technical distinction, which decides whether 10% or 2% applies.
Section 194A: Interest Other Than on Securities
Section 194A covers TDS on interest other than interest on securities, most commonly bank and post office fixed deposit interest. Budget 2025 revised these thresholds upward, with a specific increase in the threshold for senior citizens' bank and post office interest. The general thresholds for other depositors were also revised upward.
The relief here is aimed at retirees and small depositors, for whom deposit interest is often the main source of income. Raising the threshold for senior citizens means fewer of them face TDS on modest interest earnings and then have to file a return purely to reclaim it, or submit Form 15H to prevent deduction in the first place. Because the exact revised figures vary by depositor category, confirm the applicable limit for your case before assuming no deduction is due.
What Deductors Must Do From FY 2025-26
The thresholds are only useful if your systems reflect them. Deductors need to update their vendor and deduction masters so that the new limits, Rs 6,00,000 for 194I, Rs 50,000 for 194J, and the revised 194A figures, are applied from the first payment of FY 2025-26. Applying the old, lower thresholds means deducting where no deduction is due, which annoys vendors and locks up their cash. Applying them too generously means under-deduction and exposure to interest and disallowance.
Reconfigure before the first payment of FY 2025-26. Update your accounting and payroll software so the new thresholds trigger correctly, and reset the 194IB rate to 2%. Deducting at the old 5% under 194IB, or at the old Rs 2,40,000 and Rs 30,000 thresholds, creates avoidable reconciliation work and vendor disputes. Where a deductee has no PAN, Section 206AA still applies: deduct at 20% or the applicable rate, whichever is higher.
One point does not change. If a payee has not furnished a PAN, Section 206AA requires deduction at 20% or the applicable rate, whichever is higher, regardless of the new thresholds. Collect and verify PAN before the first payment to any new vendor, because the higher-rate default applies from the outset and is difficult to unwind later.
Who Benefits Most
The pattern across all four sections is a shift of small, routine payments out of the TDS net. Small landlords, especially those letting commercial space or equipment below Rs 6,00,000 a year, no longer face deduction at source. Professionals taking on modest annual assignments below Rs 50,000 receive their full fee. Senior citizens and small depositors keep more of their interest through the year rather than reclaiming it at return time. High-rent residential tenants under 194IB benefit from the lower 2% rate. In each case the relief is about cash flow and paperwork, not about a lower final tax, because the credit for any TDS that is deducted still flows through to the payee's return.
Frequently Asked Questions
What is the new TDS threshold for rent under Section 194I for FY 2025-26?
The annual threshold under Section 194I was raised from Rs 2,40,000 to Rs 6,00,000, which is Rs 50,000 per month, effective FY 2025-26. Rent below this limit attracts no TDS. The rates are unchanged at 10% for land, building or furniture and 2% for plant and machinery.
Did the TDS rate for rent change in Budget 2025?
Under Section 194I the rates did not change; only the threshold moved. Under Section 194IB, which covers rent paid by individuals and HUF not liable to audit on monthly rent above Rs 50,000, the rate was reduced from 5% to 2%.
What is the new Section 194J threshold for professional fees?
The Section 194J annual threshold was raised from Rs 30,000 to Rs 50,000 per year for FY 2025-26. The rates are unchanged at 10% for professional services and 2% for technical services.
Were TDS rates cut in Budget 2025, or only thresholds?
The reliefs were mainly to thresholds, not rates. Sections 194I and 194J kept their existing rates and only the thresholds were raised. The one rate cut was under Section 194IB, from 5% to 2%. Section 194A thresholds were revised upward, including a specific increase for senior citizens.
What changed for senior citizens under Section 194A?
The threshold for TDS on interest other than securities was revised upward, with a specific increase raised for senior citizens on bank and post office interest. This means fewer senior citizens face deduction on modest deposit interest. Confirm the exact applicable limit for your depositor category before assuming no deduction is due.
What happens if a payee does not have a PAN?
Section 206AA continues to apply regardless of the new thresholds. If the deductee has not furnished a valid PAN, TDS must be deducted at 20% or the applicable rate, whichever is higher. Collect and verify PAN before the first payment to any new vendor.
From when do the new thresholds apply and what should deductors do?
The revised thresholds apply from FY 2025-26. Deductors should update their accounting, payroll and vendor masters so the new limits are applied from the first payment of the year, and reset the 194IB rate to 2%, to stay compliant and reduce exposure to penalties from under-deduction.
This article is based on the amendments made by the Finance Act 2025 to the TDS provisions of the Income Tax Act, effective for FY 2025-26, covering the revised thresholds under Sections 194I, 194J and 194A, the rate reduction under Section 194IB, and the PAN-related default under Section 206AA. Where the Act revised figures by depositor or payee category, notably under Section 194A, confirm the exact limit applicable to your case against the Finance Act 2025 and CBDT guidance before applying it.