The Union Budget 2025 introduced by the H’be FInance Minister, Mrs. Nirmala Sitaraman in Feb 2025 had proposed significant changes to the provisions of tax deducted at source (TDS) and tax collected at source (TCS), aiming to streamline compliance and administrative procedures. The amendments are in respect to revision in thresholds, elimination of redundant provisions, rationalisation of tax rates and easing compliances both for individuals as well as businesses. These changes in TDS and TCS provisions are discussed hereunder to provide a detailed perspective on the amendments.
Please note that the rates at thresholds mentioned here under will be effective from 1st April 2025.
Proposed Changes in TDS and TCS Provisions – Budget ’25
Changes in the Threshold Limits
As a part of rationalisation some of the TDS and TCS threshold limits have been revised, as tabulated below
| S.No | Section | Description | Threshold for FY 2024-25 | Threshold for FY 2025-26 |
|---|---|---|---|---|
| 1 | 193 | Interest on securities | Nil | Rs. 10,000 |
| 2 | 194A | Interest from banks, co-op societies, post offices for senior citizens | Rs. 50,000 | Rs. 1,00,000 |
| 3 | 194A | Interest from banks, co-op societies, post offices for others | Rs. 40,000 | Rs. 50,000 |
| 4 | 194A | Interest from other sources | Rs. 5,000 | Rs. 10,000 |
| 5 | 194 | Dividend income | Rs. 5,000 | Rs. 10,000 |
| 6 | 194K | Income from mutual fund units | Rs. 5,000 | Rs. 10,000 |
| 7 | 194B | Transaction for winnings from lottery, etc. | Aggregate exceeding Rs. 10,000 during the financial year | Rs. 10,000 per single transaction |
| 8 | 194BB | Transaction for winnings from horse race | Aggregate exceeding Rs. 10,000 during the financial year | Rs. 10,000 per single transaction |
| 9 | 194D | Insurance commission | Rs. 15,000 | Rs. 20,000 |
| 10 | 194G | Commission on lottery tickets | Rs. 15,000 | Rs. 20,000 |
| 11 | 194H | Commission or brokerage | Rs. 15,000 | Rs. 20,000 |
| 12 | 194-I | Rent | Rs. 2,40,000 p.a | Rs. 50,000 p.m1 |
| 13 | 194J | Fee for professional or technical services | Rs. 30,000 | Rs. 50,000 |
| 14 | 194LA | Income by way of enhanced compensation | Rs. 2,50,000 | Rs. 5,00,000 |
| 15 | 206C(1G) | LRS remittances (TCS) | Rs. 7 lakh | Rs. 10 lakh |
Changes in the TDS and TCS Rates
The changes to TDS Rates as per the Budget 2025 are tabulated here.
| S. No. | Section | Description | Existing Rate (FY 2024-25) | Proposed Rates (FY 2025-26) |
|---|---|---|---|---|
| 1 | 194LBC | TDS on Income from Securitization Trust | 25% for individuals and HUF 30% for others | 10% (uniform rate) |
| 2 | 206C(1) | TCS on Timber/ Forest Produce | 2.5% | 2% |
| 3 | 206C(1G) | TCS on LRS Remittances for Education via Education Loan | 0.5% | Nil |
Other proposed Changes
Removal of TCS on Sale of Goods
Section 206C(1H) of the Income Tax Act, 1961 mandated TCS to be collected on Sale of Good to a particular person where the total sale proceeds from that person exceeded Rs. 50 Lakhs in a Financial Year. This section was creating unnecessary compliance burdens to the businesses as keeping track of whether or not the person had deducted TDS u/s 194Q was tedious and time-consuming.
Now the Budget 2025 has proposed to omit the section w.e.f 01st April, 2025. Due to this change, instances of buyer deducting TDS and seller collecting TCS on the sae transaction could be avoided.
However, it is to be noted that Section 194Q is still in effect and hence any person whose turnover in the previous financial year had exceeded Rs. 10 Crore purchasing goods from a person is liable to deduct TDS on the value of purchase exceeding Rs. 50 Lakhs.
Removal of Higher Rate of TDS/TCS for persons not filing Income Tax Return
As per the existing provisions of Section 206AB and Section 206CCA, where a specified assessee is a non-filer of income tax return in the previous financial year, TDS and TCS were liable to be made at higher rates than the specified rates in the respective sections.
Now the Budget 2025 has proposed to omit the sections w.e.f 01st April, 2025.
Conclusion
The Finance Act 2025’s proposed changes in TDS and TCS provisions reflect a balanced approach to tax reform, focusing on simplification and relief for taxpayers. The increased thresholds and reduced rates are expected to enhance cash flow, particularly for senior citizens and small businesses, while procedural changes like decriminalization of delays further ease compliance.
Disclaimer
As of the date of publishing this post, the Finance Bill 2025 has been presented as part of the Union Budget 2025-26 but is yet to receive assent from the President of India. The information provided in this article, including proposed changes to TDS/TCS rates, thresholds, and rationalization measures, is based on the bill as introduced in Parliament. Any modifications or amendments made during the legislative process or upon final assent will be updated in this post to reflect the officially enacted provisions. Readers are advised to refer to the final assented Finance Act 2025, available at India Budget, for the authoritative text and to consult tax professionals for personalized advice.
