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.
