If you were finding the process to pay tax deducted at source (TDS) complicated, the government has provided some relief through an increase in the threshold. In the Budget speech, the finance minister said TDS threshold on interest earned on bank and post office deposits is being raised from ₹10,000 to ₹40,000.
This will benefit small depositors and non-working spouses. Further, the TDS threshold for deduction of tax on rent is proposed to be increased from ₹1.80 lakh to ₹2.4 lakh for providing relief to small taxpayers. Section 194A of the Income Tax Act will be amended to ease the burden of compliance by way of increasing the threshold limit from ₹10,000 to ₹40,000 for deduction of tax at source on interest income, other than interest on securities, paid by a banking company, co-operative society or a post office. Similarly section 194-I of the Income-tax Act will be amended to rationalise the threshold limit from ₹1.8 lakh to ₹2.4 lakh for deduction of tax at source on rental income.
What it means for you
Firstly, the increase in the limit for TDS does not mean that you don’t have to pay tax on the amount if you have a taxable income.
If you earn interest from bank deposits and post office deposits and if that income falls under the taxable income, you will have to pay tax on it. Why does the government ask you to pay TDS? “Through TDS government knows that you have earned income. As you earn interest income from bank or tenant, the government also earns the tax on regular basis. It doesn’t want to wait till end of the financial year for you to file the returns and then make the tax payment. Earlier if you didn’t have a taxable income, you could make a declaration on Form 15G. Now you don’t have to do that as well for amount up to ₹40,000," said Archit Gupta, founder and chief executive officer, Cleartax.com.
This is a compliance change making it convenient for individuals who don’t have a taxable income such as non-working spouses, senior citizens and small depositors. Hence, it is a relief for low income earners. However, if you have a taxable income, you have to pay tax on the income you earn through interest from deposits and rental income.