New TDS, TCS Rules from 1 April, 2025: What You Need to Know
The Indian government has introduced significant changes to the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) regulations through the Finance Bill 2025. These new rules, effective from April 1, 2025, aim to simplify compliance, enhance liquidity for taxpayers, and reduce administrative burdens. Whether you’re a salaried individual, landlord, senior citizen, freelancer, or someone sending money abroad, understanding these changes is crucial for effective financial planning.
Also Read-TDS Rates Chart for FY 2024-25 (AY 2025-26)
In this article, we’ll explore the latest updates on TDS and TCS rules announced in Budget 2025 and how they impact different sections of taxpayers in India.
New TDS, TCS Rules from 1 April, 2025: Key Highlights
The Finance Bill 2025 proposes substantial revisions in threshold limits for TDS and TCS across various categories. Here’s a quick overview:
| Type of Income or Transaction | Old Threshold Limit | New Threshold Limit (From April 1, 2025) |
|---|---|---|
| Interest Income (Senior Citizens) | ₹50,000 | ₹1 lakh |
| Interest Income (General Public) | ₹40,000 | ₹50,000 |
| Rent Income | ₹2.4 lakh | ₹6 lakh |
| Professional Fees | ₹30,000 | ₹50,000 |
| Dividend Income | ₹5,000 | ₹10,000 |
| Mutual Fund Income | ₹5,000 | ₹10,000 |
| Enhanced Compensation | ₹2.5 lakh | ₹5 lakh |
| Remittance under LRS & Overseas Tour Packages | ₹7 lakh | ₹10 lakh |
| Education Loan Remittance under LRS | 0.5% over ₹7 lakh | No TCS applicable |
The Finance Bill 2025 has proposed to increase the threshold limit for deduction of tax for various provisions. The threshold limits are as follows:
| Section | Nature of income | Current threshold | Proposed threshold |
|---|---|---|---|
| 193 | Interest on securities | Nil | ₹10,000 |
| 193 | Interest payable to resident individual/HUF on any debenture issued by public company | ₹5,000 | ₹10,000 |
| 194 | Dividend | ₹5,000 for individual shareholder | ₹10,000 for individual shareholder |
| 194A | Interest other than interest on securities | – ₹50,000 for senior citizen – ₹40,000 in case of others if payer is a bank, cooperative society and post office – ₹5,000 in other cases | – ₹1,00,000 for senior citizen – ₹50,000 in case of others if payer is a bank, cooperative society and post office – ₹10,000 in other cases |
| 194B | Winning from Lotteries, Crossword Puzzles, gambling, betting, etc. (except online games) | Aggregate of amounts exceeding ₹10,000 during the financial year | ₹10,000 in respect of a single transaction |
| 194BB | Winning from horse race | Aggregate of amounts exceeding ₹10,000 during the financial year | ₹10,000 in respect of a single transaction |
| 194D | Insurance commission | ₹15,000 | ₹20,000 |
| 194G | Commission and other payments on sale of lottery tickets | ₹15,000 | ₹20,000 |
| 194H | Commission and Brokerage | ₹15,000 | ₹20,000 |
| 194-I | Rent | ₹2,40,000 during the financial year | ₹50,000 per month or part of a month |
| 194J | Royalty and fees for professional or technical services | ₹30,000 | ₹50,000 |
| 194K | Income in respect of units of mutual fund | ₹5,000 | ₹10,000 |
| 194LA | Compensation on account of compulsory acquisition of an immovable property (other than agriculture land) | ₹2,50,000 | ₹5,00,000 |
Key Highlights of the New TDS and TCS Rules
1. Relief for Senior Citizens
One of the most significant changes is the doubling of the TDS exemption limit on interest income for senior citizens. The threshold has been increased from ₹50,000 to ₹1,00,000 annually. This change will provide substantial relief to retirees who rely on interest income from their savings and fixed deposits.
2. Boost for Landlords and Property Owners
The TDS threshold for rental income has seen a substantial increase from ₹2,40,000 to ₹6,00,000 per year. This change is particularly beneficial for landlords in metropolitan areas where rental values are higher. It will improve cash flow for property owners and reduce the compliance burden associated with TDS on rental income.
3. Simplified Remittances for Education and Travel
The TCS threshold under the Liberalized Remittance Scheme (LRS) has been raised from ₹7,00,000 to ₹10,00,000. This increase will benefit individuals sending money abroad for education or travel purposes, allowing for more flexibility in managing overseas expenses without immediate tax implications.
4. Support for Professionals and Gig Workers
The TDS threshold for professional and technical services fees has been increased from ₹30,000 to ₹50,000. This change will particularly benefit freelancers, consultants, and gig economy workers, reducing the frequency of TDS deductions on their income and improving their cash flow.
Impact on Different Taxpayer Categories.
For Individuals:
- Senior Citizens: Improved liquidity with higher TDS exemption on interest income.
- Professionals: Reduced TDS burden on fees up to ₹50,000.
- Investors: Higher threshold for TDS on dividends and mutual fund income.
For Businesses:
- Simplified Compliance: Reduced frequency of TDS deductions for various payments.
- Improved Cash Flow: Higher thresholds mean less tax withheld at source.
- Elimination of TCS on Goods: Removal of TCS on sale of goods exceeding ₹50 lakh annually.
In addition to the revised TDS thresholds, the Finance Bill proposes several other significant changes to TDS and TCS regulations. Here are some key modifications that will impact individual taxpayers:
Reduced TDS Rate for Securitisation Trust Income.
The TDS rate under Section 194LBC for income payable by a securitisation trust to a resident investor is set to decrease from 25%/30% to 10%. This reduction aims to enhance the attractiveness of securitisation instruments for investors.
Removal of Higher Tax Rates for Non-Filers.
The government has proposed to omit Section 206AB, which mandated higher TDS rates for individuals who failed to file their income tax returns for a specified period. Consequently, the reference to this section in Section 194S will also be removed. This change simplifies the TDS process and eliminates punitive measures for non-filers.
Similarly, Section 206CCA, which imposed higher TCS rates on non-filers, is also slated for removal. These changes reflect a shift towards a more streamlined tax collection approach.
Increased Threshold for LRS and Overseas Tour Packages.
The threshold limit for TCS collection under Section 206C(1G) by authorized dealers on remittances made under the Liberalised Remittance Scheme (LRS) and for overseas tour packages is proposed to increase from ₹7 lakh to ₹10 lakh. This higher threshold provides more flexibility for individuals sending money abroad or purchasing international travel packages.
TCS Exemption for Education Loans.
A notable proposal exempts authorized dealers from collecting TCS under Section 206C(1G) on foreign currency remittances from education loans obtained under Section 80E(3)(b). This exemption will benefit students pursuing education abroad using educational loans.
These proposed changes are expected to take effect from April 1, 2025, and will apply from the Assessment Year 2025-26 onwards, subject to the Finance Act 2025 being passed by Parliament.
Latest Studies: How Simplified Taxation Boosts Economic Growth
Recent studies indicate simplified tax compliance directly correlates with economic growth by improving liquidity and reducing administrative burdens:
- According to a report by Nangia Andersen LLP (2025), simplified tax thresholds encourage better cash flow management among taxpayers.
- A Trilegal study highlights that rationalizing tax provisions significantly reduces compliance costs for businesses and individuals alike.
Frequently Asked Questions (FAQs)
Q: When will these new TDS/TCS rules come into effect?
A: These rules are effective starting April 1st, 2025.
Q: Are senior citizens completely exempted from paying taxes on interest income?
A: No; senior citizens still need to pay taxes if their total taxable income exceeds basic exemption limits but won’t face upfront deductions if interest earned is below the revised threshold of ₹1 lakh annually.
Q: Do I need to file returns even if my income falls below these thresholds?
A: Filing returns is mandatory if your total income exceeds basic exemption limits set by IT department irrespective of whether TDS/TCS applies or not.
Q: Has any section been omitted entirely in Budget 2025?
A: Yes; Section 206CCA which earlier mandated higher rates for non-filing taxpayers has been proposed for omission in Budget 2025.
By understanding these comprehensive changes introduced under Budget 2025 regarding “New TDS & TCS Rules effective from April 1st”, taxpayers across India can better plan their finances and ensure smoother compliance processes moving forward.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. The information provided is based on current understanding of tax laws which are subject to change. Readers are advised to consult with qualified tax professionals for personalized advice tailored to their specific circumstances.
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C.K. Gupta
Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.
