Starting April 1, 2025, the Indian government is rolling out significant changes to the Tax Deducted at Source (TDS) framework, as announced in the Union Budget 2025. These reforms aim to simplify tax compliance, provide financial relief to various taxpayer categories, and enhance transparency in the taxation system. Here's a comprehensive breakdown of the key changes:
Increased TDS Thresholds: More Savings for Taxpayers
- For Senior Citizens
- Interest Income Exemption: The TDS exemption limit on interest income from fixed deposits (FDs), recurring deposits (RDs), and other savings instruments has been doubled from ₹50,000 to ₹1,00,000 per annum. This means banks will not deduct TDS if a senior citizen's total interest income in a financial year is up to ₹1 lakh.
- For General Taxpayers
- Interest Income Exemption: Interest Income Exemption: For individuals below 60 years, the TDS exemption limit on interest income has been increased from ₹40,000 to ₹50,000 per annum. This adjustment aims to reduce the tax burden on small depositors.
Simplified TDS Rules for Specific Incomes
- Lottery, Crossword Puzzles, and Horse Racing Winnings
- Per Transaction Threshold: Previously, TDS was deducted if the aggregate winnings in a financial year exceeded ₹10,000. Now, TDS will apply only if a single transaction exceeds ₹10,000. This change benefits individuals with multiple small winnings.
- Dividend Income
- Increased Exemption Limit: The TDS exemption limit on dividend income from mutual funds and stocks has been raised from ₹5,000 to ₹10,000 per annum, providing relief to small investors.
Changes in TDS on Rent
- Threshold Enhancement: The annual TDS threshold for rental income has been increased from ₹2.4 lakh to ₹6 lakh. This means that individuals paying rent up to ₹50,000 per month will not be subject to TDS deductions.
Adjustments in TDS Rates and Provisions
- Commission and Brokerage
- Insurance Commission: The TDS threshold for insurance commission payments has been increased from ₹15,000 to ₹20,000.
- Brokerage and Other Commissions: Similar enhancements have been made for other commission-based incomes, easing the compliance burden on small earners.
- Securitisation Trust Income
- Reduced TDS Rate: The TDS rate on income payable by a securitisation trust to a resident investor has been reduced from 25%/30% to 10%, making investments in such instruments more attractive.
Revisions in TCS Provisions
- Liberalised Remittance Scheme (LRS)
- Increased Threshold: The threshold for Tax Collected at Source (TCS) on remittances under the LRS has been raised from ₹7 lakh to ₹10 lakh, providing more leeway for individuals making foreign remittances.
- Education Loan Exemption: Remittances for education purposes, where the funds are sourced from loans obtained from specified financial institutions, are now exempt from TCS.
Compliance and Procedural Changes
- Removal of Higher TDS/TCS for Non-Filers: Sections 206AB and 206CCA, which imposed higher TDS and TCS rates on individuals not filing income tax returns, have been omitted. This move simplifies the tax structure and reduces the compliance burden.
- Decriminalisation of TCS Delays: Delays in depositing TCS up to the due date of filing the statement have been decriminalised, aligning with similar provisions for TDS and promoting ease of doing business.
Key Takeaways
- Enhanced Exemptions:
Increased TDS thresholds across various income categories provide financial relief to taxpayers.
- Simplified Compliance:
Procedural changes aim to make tax compliance more straightforward and less burdensome.
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Investor-Friendly Measures: Adjustments in TDS and TCS provisions encourage investment and ease of financial transactions.
These comprehensive changes reflect the government's commitment to simplifying the tax regime and providing relief to taxpayers. Taxpayers are advised to review these updates carefully and consult with financial advisors to understand how these changes may impact their individual tax situations
