Here’s a look at Income Tax changes impacting homebuyers from April 1
The proposed amendment in the Budget 2025 lowers the TDS threshold for rental income from ₹2,40,000 per year to ₹50,000 per month or part thereof
Budget 2025 had some good news for homeowners and homebuyers. The changes proposed in the budget will come into effect on April 1, 2025. We examine the impact of these changes.
Two Homes To Get Tax Relief
“Presently, the annual value of a self-occupied property is considered as NIL. If a homeowner does not occupy the property for specific reasons, i.e., due to employment or business or profession carried out at any other place, then the annual value of an additional property so occupied is also considered as NIL as per Budget 2025, which was not the case earlier,” says Hemal Mehta, Partner, Deloitte India.
This amendment is a welcome relief for home buyers. It will effectively let homeowners own two self-occupied properties without any additional income tax under the heading ‘income from house property’.
Say a homeowner holds one large house and is looking to sell such a house to buy two small units in the same vicinity (due to nuclearization of a joint family, etc.). “In such a case, the home can avail section 54 exemption on capital gains arising from the sale of the larger property on the subsequent purchase of two units and also now avail the NIL annual value benefit for the two houses,” says Mehta.
Also Read: Income Tax Bill 2025: New Bill clarifies carry forward of house property losses
Proposed Amendment to Section 194-I of the Income-tax Act, 1961
As per the existing provisions of Section 194-I of the Income-tax Act, 1961, any person (other than an individual or a Hindu Undivided Family) responsible for paying rent to a resident is required to deduct tax at source (TDS) if the total rental payment exceeds ₹2,40,000 in a financial year.
“In order to streamline this provision, it is proposed to revise the threshold limit for TDS applicability. The proposed amendment increases the threshold from ₹2,40,000 per financial year to ₹50,000 per month or part thereof,” says Suresh Surana, a Mumbai-based chartered accountant.
This amendment will become effective on April 1, 2025, once the Finance Act 2025 is passed.
Consider a person renting out an office space at ₹45,000 per month. Under the existing rules, 10% TDS must be paid as the annual rent exceeds ₹2,40,000. The TDS that needed to be paid would be ₹54,000. However, under the proposed amended provision, since the monthly rent does not exceed Rs. 50,000, TDS will not be applicable from April 1.
No Tax Up to An Income Of ₹12 lakh
Since there will be no tax up to an income of ₹12 lakh as proposed in the budget, starting April 1, people who have a salaried income of ₹12 lakh will have an additional tax saving of ₹80,000 under the new tax regime. If we assume that Mr. Singh earning ₹12 lakh can save the entire ₹80,000, he or she can pay an additional EMI of ₹6,600. This will enable him to afford a higher-priced house.
If his EMI was ₹40,000 earlier, and the interest rate was 8.75 per cent, he could buy a property worth approximately ₹45-50 lakh. With an EMI of ₹46,000, he can buy a property worth ₹52 -58 lakh starting the beginning of the new financial year. Also, since the RBI reduced the interest rate by 25 bps in its last policy meeting, the interest rate will come down slightly.
SWAMIH Fund 2 To Benefit Homebuyers
The finance minister launched the SWAMIH Fund-2 in Budget 2025. The aim fund is meant to provide relief to distressed housing projects. Under the first SWAMIH fund, 50,000 stalled projects were completed. This helped homebuyers paying EMIs for incomplete properties even as they were paying rent.
With the SWAMIH Fund-2, the government plans to complete an additional 40,000 units in 2025, which will benefit middle-class homebuyers.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
