The Union Budget 2025, presented by Finance Minister Smt. Nirmala Sitharaman on February 1, 2025, brought several changes aimed at enhancing the ease of doing business and promoting better taxpayer compliance. A significant proposal in the Finance Bill 2025 is the rationalization of various TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rates, including an increase in the threshold limits for TDS applicability under several sections. These changes are expected to ease the tax burden on taxpayers, particularly individual taxpayers, and provide relief to smaller income groups.
The following table outlines the proposed changes in TDS thresholds, which will come into effect from the assessment year 2025-26.
| S. No. | Section | Nature of Income | Current Threshold | Proposed Threshold |
|---|---|---|---|---|
| 1. | 193 | Interest on Securities | Nil | Rs. 10,000 |
| Interest payable to resident individual/HUF on any debenture issued by public company | Rs. 5,000 | Rs. 10,000 | ||
| 2. | 194 | Dividend | Rs. 5,000 | Rs. 10,000 |
| 3. | 194A | Interest other than interest on Securities | • Rs. 50,000 for senior citizen; • Rs. 40,000 in case of others when payer is bank, cooperative society and post office. • Rs. 5,000 in other cases | • Rs. 1,00,000 for senior citizen • Rs. 50,000 in case of others when payer is bank, cooperative society and post office • Rs. 10,000 in other cases |
| 4. | 194B | Winning from Lotteries, Crossword Puzzles, gambling, betting, etc. (except online games) | Aggregate of amounts exceeding Rs. 10,000 during the financial year | Rs. 10,000 in respect of a single transaction |
| 5. | 194BB | Winnings from online games | Not Provided | Not Provided |
| 6. | 194D | Insurance Commission | Rs. 15,000 | Rs. 20,000 |
| 7. | 194G | Commission and other payments on sale of lottery tickets | Rs. 15,000 | Rs. 20,000 |
| 8. | 194H | Commission and Brokerage | Rs. 15,000 | Rs. 20,000 |
| 9. | 194-I | Rent | Rs. 2,40,000 during the financial year | Rs. 50,000 per month or part of a month |
| 10. | 194J | Royalty and Fees for Professional or Technical Services | Rs. 30,000 | Rs. 50,000 |
| 11. | 194K | Income in respect of units of mutual fund | Rs. 5,000 | Rs. 10,000 |
| 12. | 194LA | Compensation on account of compulsory acquisition of an immovable property (other than agriculture land) | Rs. 2,50,000 | Rs. 5,00,000 |
Impact of the Proposed Changes:
Increased Threshold for TDS Applicability: Several TDS thresholds have been significantly increased, which will reduce the compliance burden for individuals and businesses. For instance, the threshold for TDS on rent has been raised to Rs. 50,000 per month (from Rs. 2,40,000 annually), benefiting both taxpayers and landlords.
Higher Limits for Senior Citizens: The proposed increase in the TDS exemption for senior citizens (from Rs. 50,000 to Rs. 1,00,000 for interest other than securities) is a welcome relief, particularly for retirees who depend on fixed income sources.
Easier Compliance for Small Taxpayers: Many small taxpayers, especially those receiving income from interest or dividends, will see relief due to the higher thresholds. This includes the increase in the threshold for interest and dividend income, which will mean fewer deductions at source for small amounts.
Sector-Specific Relief: The reduction in the TDS rate under Section 194LBC for securitization trusts from 25%/30% to 10% is an important move aimed at promoting growth in the well-regulated securitization sector.
Potential Growth for Online Gaming Sector: With the introduction of TDS applicability for winnings from online games, there will be greater regulation and transparency, potentially benefiting the growing online gaming industry.
Overall, these changes are designed to simplify the taxation process, enhance compliance, and reduce the burden on small and medium taxpayers, contributing to a more efficient and business-friendly tax environment
