The move will go a long way towards reducing the tax burden of individuals and companies earning rental income. Professionals, small businesses and companies paying rent above Rs 1,20,000 annually are statutorily required to deduct TDS.

The TDS rate is 15 per cent for individuals and 20 per cent for companies earning rental income from land, buildings (including factory buildings) and furniture. The rate is 10 per cent on rental income from machinery, plant and equipment.

The move to increase the  rental income limit has become necessary after the basic exemption limit from income tax for individuals was raised to Rs 1,50,000 a year in Budget 2008, officials said.

"The move will be a great relief to pensioners and retired people whose only source of income is from immovable property like house rent," said a tax consultant.