Top Stories TDS & TCS Rate Changes from April 1, 2025: What You Need to Know From 1st April 2025, Budget 2025 raises TDS exemption limits, removes TCS on some goods, and lowers tax rates for key transactions By Kavi Priya – On February 26, 2025 1:26 pm – 3 mins read The Union Budget 2025 has introduced major changes in TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions to simplify tax compliance for businesses and taxpayers.

The focus is on: Higher exemption limits for a tax deduction (TDS) on interest, dividends, rent, and professional fees. Revised TDS on winnings from lotteries, commissions, and brokerage TCS removed on certain transactions to reduce the compliance burden Lower tax rates for securitization trusts and NRI property purchases These changes, effective from 1st April 2025, aim to make tax procedures smoother while ensuring better compliance. TDS Mistakes Cost You More Than You Think – Stay Compliant with This Handbook! Click Here 1. Enhanced Threshold for Tax Deduction (TDS) TDS is deducted only when a transaction exceeds a certain threshold.

The government has increased these limits, allowing more transactions to stay tax-free while keeping the TDS rates unchanged. New TDS Thresholds (Effective 1st April 2025) Section Nature of Payment Existing Threshold (till 31 March 2025) New Threshold (w.e.f. 1 April 2025) 197 Interest on Securities Nil Rs. 10,000 194 Dividend for an individual shareholder Rs. 5,000 Rs. 10,000 194A Interest Other Than Securities A) Senior Citizen B) Bank/Co-Op/Post Office C) Other Cases A) Rs. 50,000 B) Rs. 40,000 C) Rs. 5,000 A) Rs. 1,00,000 B) Rs. 50,000 C) Rs. 10,000 194B & 194BB Winnings from lottery/crossword puzzle/horse race Aggregate Amount Rs. 10,000 Single Transaction Rs. 10,000 194D, 194G & 194H Commission on Insurance/Brokerage/Sale of Lottery Tickets Rs. 15,000 Rs. 20,000 194I Rent Rs. 2,40,000 Rs. 50,000 per month / Rs. 6,00,000 per annum 194J Fee for Professional, Technical Services, and Royalty Rs. 30,000 Rs. 50,000 194K

Income in respect of units Rs. 5,000 Rs. 10,000 194LA Enhanced compensation Rs. 2,50,000 Rs. 5,00,000 206C(1G) Remittance Under Liberalized Remittance Scheme (LRS) Rs. 7,00,000 Rs. 10,00,000 Summary of TDS Threshold Enhancements: More tax-free income: Higher exemption limits for interest, rent, dividends, and professional fees mean less tax deduction at the source. Stricter TDS rules for winnings: Lottery, crossword, and horse race winnings will now be taxed per transaction rather than on the total amount won in a year. Liberalized Remittance Scheme (LRS): The tax-free limit for foreign remittances has been increased from Rs. 7,00,000 to Rs. 10,00,000, making overseas payments easier.

2. Lower TDS Rates for Securitization Trusts (Section 194LBC) Currently, securitization trusts (investment vehicles pooling assets like loans and bonds) must deduct TDS at 25% for individuals and 30% for non-individuals. From 1st April 2025, the government has reduced these rates: Payee Existing TDS Rate New TDS Rate (w.e.f. 1 April 2025) Individual / HUF 25% 10% Others (companies, partnerships, etc.) 30% No change This change reduces the tax burden on investors in securitization trusts and encourages investments in the financial sector by lowering upfront tax deductions.

New TCS Thresholds (Effective 1st April 2025) Section Nature of Payment Existing TCS Rate (till 31 March 2025) New TCS Rate (w.e.f 1 April 2025) 206C(1) Timber/Forest Produce & Scrap 2.5% 2% 206C(1G) LRS – Remittance out of Education Loan 5% Omitted 206C(1H) TCS Collection for Sale of Goods 1% Omitted 195 Payment to NRI for the purchase of immovable property 20% 12.5% 3. TCS on Sale of Goods Removed to Ease Compliance Under Section 206C(1H), businesses had to collect TCS (1%) on sales exceeding Rs. 50,00,000, creating compliance issues when buyers deducted TDS under Section 194Q. What’s changing? TCS on the sale of goods is now removed from 1st April 2025, eliminating confusion and reducing compliance burdens for businesses. So, No need to track if TDS was deducted by the buyer and smoother transactions for sellers, reducing paperwork and potential penalties for missing TCS payments.

4. Changes in TCS for Forest Produce (Section 206C(1)) The definition of ‘forest produce’ will now align with the Indian Forest Act, 1927, or State laws. TCS on timber and other forest produce (except tendu leaves) is reduced from 2.5% to 2%. Impact: Lower tax burden for businesses involved in the timber and forest produce industry. Want a deeper insight into the Income Tax Bill, 2025? Click here 5. Higher TCS Limit for Remittances Under LRS & Tour Packages The TCS-free limit for sending money abroad (LRS) has increased from Rs. 7,00,000 to Rs. 10,00,000, making foreign transactions easier.

No TCS on education-related remittances if the money is from an education loan. These changes eases financial pressure on students and families sending money for overseas education. Reduces TCS compliance for foreign remittances. 6. Removal of Higher TDS/TCS for Non-Filers of Income Tax Returns Currently, under Section 206AB and 206CCA, individuals who don’t file income tax returns face higher TDS and TCS rates (if their tax deductions exceed Rs. 50,000 per year). What’s changing? From 1st April 2025, these sections are removed! So, Businesses no longer need to verify whether a person has filed their tax return before deducting TDS or TCS. Simplifies tax compliance and reduces paperwork for companies