Major TDS Amendments Effective from 1st April 2025: A Comprehensive Overview

To simplify tax compliance and enhance the ease of doing business, the Finance Act has proposed significant changes to the Tax Deducted at Source (TDS) provisions under the Income Tax Act. These amendments, effective from 1st April 2025, include rationalization of TDS rates, revised threshold limits, and relief from overlapping TDS and TCS obligations.

1. Rationalization of TDS Rates

Reduction in TDS Rate under Section 194LBC

The TDS rate for income payable to residents from securitisation trusts under section 194LBC has been reduced:

  • From:25% for individuals/HUF and 30% for others
  • To:A uniform 10% This aligns with the structured and regulated nature of the sector.

2. Revision of Thresholds for TDS Applicability

Key Changes in Thresholds Across Various Sections

Section Nature of Payment Existing Threshold Revised Threshold
193 Interest on securities Nil Rs10,000
194A Interest (banks, co-ops, post office): others/senior citizens Rs40,000/Rs50,000 Rs50,000/Rs1,00,000
194A Other interest payments Rs5,000 Rs10,000
194 Dividend to individuals Rs5,000 Rs10,000
194K Income from mutual fund units Rs5,000 Rs10,000
194B Lottery/crossword winnings Aggregate > Rs10,000 Rs10,000 per transaction
194BB Horse race winnings Aggregate > Rs10,000 Rs10,000 per transaction
194D Insurance commission Rs15,000 Rs20,000
194G Commission on lottery tickets Rs15,000 Rs20,000
194H Commission or brokerage Rs15,000 Rs20,000
194-I Rent Rs2,40,000/year Rs50,000/month
194J Fees for professional, technical services, royalty Rs30,000 Rs50,000
194LA Compensation for immovable property acquisition Rs2,50,000 Rs5,00,000

These updates aim to reduce compliance for smaller payments and better align TDS applicability with inflation and transaction values.

3. Section-wise Highlights

Section 193 – Interest on Securities

A threshold of Rs10,000/year is introduced for TDS applicability, ensuring low-value interest payments are exempt.

Section 194 – Dividends

The exemption limit for individual shareholders is enhanced to Rs10,000/year.

Section 194A – Interest Other Than Securities

Significant hikes in exemption limits:

  • Senior citizens:From Rs50,000 to Rs1,00,000
  • Others (banking, co-op, post office):From Rs40,000 to Rs50,000
  • Others:From Rs5,000 to Rs10,000

Section 194B & 194BB – Winnings

TDS will now apply on each transaction exceeding Rs10,000, rather than aggregate winnings in the year.

Section 194J – Professional and Technical Fees

The threshold for TDS deduction has been increased to Rs50,000 for all categories including royalty and fees under section 28(va).

4. Amendments in TCS Provisions

Definition of “Forest Produce”

The term “forest produce” is now aligned with definitions in relevant State Acts or the Indian Forest Act, 1927. Only produce obtained under a forest lease will attract TCS.

TCS on Sale of Goods under Section 206C(1H)

This provision, which mandated sellers to collect TCS at 0.1% on receipts exceeding Rs50 lakh, will be omitted from 1st April 2025 to avoid dual compliance with section 194Q, which requires TDS by the buyer on the same transaction.

5. Objective Behind the Amendments

These amendments are a part of the broader tax administration reform and aim to:

  • Avoid duplication of TDS and TCS on the same transaction.
  • Provide relief to small payees and reduce the compliance burden.
  • Encourage transparency, timely compliance, and taxpayer convenience.

Conclusion:

The changes effective from 1st April 2025 represent a move towards a more rationalized, compliance-friendly TDS framework. Taxpayers and businesses must align their systems and processes to reflect these new thresholds and rates to ensure smooth compliance.

Scroll to Top