The Finance Bill 2025 introduces changes to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) to improve business ease and taxpayer compliance. The proposed changes include a reduction in certain TDS/TCS rates, such as a decrease in TDS for securitization trust income (from 25% to 10%) and TCS on timber (from 2.5% to 2%). Also, the threshold limits for several provisions have been raised. For instance, the threshold for TDS on interest from securities will be Rs. 10,000, while the threshold for dividends will increase to Rs. 10,000, up from Rs. 5,000. Other provisions like insurance commission and lottery winnings have also seen threshold adjustments. These changes aim to simplify tax compliance and apply from April 1, 2025.
FAQs: Rationalization of rates and threshold of tax deducted at source (TDS) and tax collected at source (TCS) – Budget 2025
Q.1 What are the main changes in Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) proposed by the Budget 2025?
Ans. (i) To improve ease of doing business and better compliance by taxpayers, certain rates of TDS and TCS has been rationalized.
(ii) Threshold limit for applicability of the TDS and TCS provisions has also been increased.
Q.2 What are the changes proposed in Finance Bill, 2025 with regard to rates of TDS and TCS?
Ans. Following changes are proposed in the rates of TDS and TCS:
| S. No. | Section of the Act | Existing TDS/TCS Rate | Proposed TDS/TCS Rate |
| 1. | Section 194LBC – Income in respect of investment in securitization trust | 25% if payee is Individual or HUF and 20% otherwise |
10% |
| 2. | Sub-section (1) of section 206C – TCS on timber or any other forest produce (not being tendu leaves) obtained under a forest lease and timber obtained by any mode other than under a forest lease | 2.5% | 2% |
| 3. | Sub-section (1G) of section 206C – TCS on remittance under LRS for purpose of education, financed by loan from financial institution | 0.5% after Rs. 7 lakh |
Nil |
Q.3 What are the changes proposed in Finance Bill, 2025 with regard to threshold of TDS and TCS?
Ans. Following changes are proposed in the threshold of TDS and TCS:
| S. No. | Section of the Act | Present TDS/TCS
threshold (in Rs.) |
Proposed TDS/TCS
threshold (in Rs.) |
| 1. | 193 – Interest on securities | Nil | 10,000/- |
| 2. | 194A – Interest other than Interest on securities | (i) 50,000/- for senior citizen;(ii) 40,000/- in case of others when payer is bank, cooperative society and post office(ii) 5,000/- in other cases |
(i) 1,00,000/- for senior citizen(ii)50,000/- in case of others when payer is bank, co-operative society and post office(Iii) 10,000/- in other cases |
| 3. | 194 –Dividend, for an individual shareholder | 5,000/- | 10,000/- |
| 4. | 194K – Income in respect of units of a mutual fund or specified company or undertaking |
5,000/- | 10,000/- |
| 5. | 194B – Winnings from lottery, crossword puzzle etc. | Aggregate of amounts exceeding 10,000/- during the financial year |
10,000/- in respect of a single transaction |
| 6. | 194BB – Winnings from horse race | ||
| 7. | 194D – Insurance commission | 15,000/- | 20,000/- |
| 8. | 194G – Income by way of commission, prize etc. on lottery tickets |
15,000/- | 20,000/- |
| 9. | 194H – Commission or brokerage | 15,000/- | 20,000/- |
| 10 | 194-I Rent | 2,40,000/- during the financial year |
50,000/- per month or part of a month |
| 11
|
194J – Fee for professional or technical services | 30,000/-
|
50,000/-
|
| 12 | 194LA – Income by way of enhanced compensation |
2,50,000/- | 5,00,000/- |
| 13 | 206C(1G)- Remittance under LRS and overseas tour program package |
7,00,000/- | 10,00,000/- |
Q.4 From when will these changes be made applicable?
Ans. These changes will be effective from 01.04.2025.
Limit of TDS on rent enhancement from Rs20K to Rs50 K is over liberal. Rs30 K is encourages avoidance of tax. A property held by two joint owners can avoid TDS and tax upto Rs1 lakh per month. ( 2 x 50K), earlier Rs40 K (Rs.20 K x2)