TDS Amendments: Union Budget 2025
The much-awaited Union Budget of 2025-26 has proposed several important and alluring changes in tax deduction and collection aimed at simplifying compliance and improving the efficiency of tax administration. Changes proposed are threshold changes, repealing redundant provisions, and a seamless tax administration for individuals as well as businesses.
Increased TDS and TCS Limits
Limits for Tax Deducted at Source and Tax Collected at Source have been raised in the budget proposals regarding tax rationalization and so as to keep compliance with tax easy.
New measures for rationalisation of TDS are as follows:
| Section | Present | Proposed |
|---|---|---|
| 193 - Interest on securities | NIL | 10,000 |
| 194A - Interest other than Interest on securities (Senior citizens (when payer is bank, cooperative society, or post office) | 50,000 | 1,00,000 |
| 194A - Interest other than Interest on securities (Others (when payer is bank, cooperative society, or post office)) | 40,000 | 50,000 |
| 194A - Other cases | 5,000 | 10,000 |
| 194 - Dividend (for an individual shareholder) | 5,000 | 10,000 |
| 194K - Income in respect of units of a mutual fund | 5,000 | 10,000 |
| 194B - Winnings from lottery, crossword puzzle, etc. & 194BB - Winnings from horse race | Aggregate exceeding 10,000 in a financial year | 10,000 per transaction |
| 194D - Insurance commission | 15,000 | 20,000 |
| 194G - Income by way of commission, prize, etc. on lottery tickets | 15,000 | 20,000 |
| 194H - Commission or brokerage | 15,000 | 20,000 |
| 194-I – Rent | 2,40,000 (per financial year) | 6,00,000 (per financial year) |
| 194J - Fee for professional or technical services | 30,000 | 50,000 |
| 194LA - Income by way of enhanced compensation | 2,50,000 | 5,00,000 |
| 206C(1G) – Remittance under LRS and overseas tour program package | 7,00,000 | 10,00,000 |
Notes:
- TCS (Tax Collected at Source) will be removed on remittances made for educational purposes when financed through loans from specified financial institutions (Section 80E).
- TCS on purchase of goods (w.e.f. April 1, 2025).
- TDS at higher rates will be levied only if the taxpayer fails to provide PAN.
TCS on Remittances under LRS
Increased limits on TCS for remittances under LRS of RBI stands out prominently in this budget. Earlier, the threshold was Rs 7 lakh, which increased to Rs 10 lakh and, according to this, allows individuals more freedom while remitting abroad. In addition to this, the budget has proposed to do away with TCS on educational remittance, provided it is funded through a loan taken from a financial institution recognized for this purpose. Another awaited relief for students and their families.
Reduced Compliance Burden: Scrapping TCS on Sale of Certain Particular Goods
A seller selling goods for consideration exceeding Rs. 50 lakh has to collect tax from buyers at a rate of 0.1%. This applies per sub-section (1H) of section 206C of the Income-tax Act. But as an effort to ease doing business and ease compliance requirements, it shall no longer be applicable from April 1st 2025, making sure a transaction will not be subject to both TDS under Section 194Q and TCS Section 206C(1H).
Abolition of Higher Rates of TDS/TCS for Non-Filers
With these measures for simplification of tax compliance, the budget proposes deleting from the Income Tax Act sections 206AB and 206CCA. At present, these provisions stipulate the higher rate of TDS and TCS applicable to taxpayers who have not filed their income tax returns. In essence, the government wants to free tax deductors and collectors from the restraints placed on them in their tracks.
Exempt from Penalty for Late TCS Payment
Failure by the assessee to deposit the TCS with the Central Government is punishable according to Section 276BB of the Income-tax Act, so severe that it may completely imprison him for three months to seven years and a fine. The recently introduced budget has similar provisions for amending this section saying that no prosecution would be initiated if tax collection is deposited within the time-frame provided in law for filing quarterly statements. Such provisions will prove extremely beneficial for businesses where sometimes delay processing can take place without legal implications.
Concluding Remarks
The proposed changes to TDS and TCS under Union Budget 2025-26 are aimed at cutting down the complicated process and bringing more simplicity in terms of paying taxes for businesses as well as individuals. Increase in threshold limits, removal of overlapping provisions, and exemption from prosecution in certain cases significantly indicate a move towards a taxpayer-friendly system. Thus, these factors will enhance efficiency, reduce the administrative burden, and pave the way for a smooth taxation compliance experience for all.