The Finance Bill 2025 introduces significant rationalization of Tax Deducted at Source (TDS) thresholds to simplify compliance and enhance clarity for taxpayers. For Section 193, covering interest on securities, a threshold of ₹10,000 is proposed, replacing the existing rule with no threshold, effective April 1, 2025. Similarly, Section 194A increases the thresholds for interest income to ₹1,00,000 for senior citizens and ₹50,000 for others in specific cases, while introducing a ₹10,000 threshold for other situations. Other adjustments include raising the TDS limit for dividends (Section 194) and mutual fund income (Section 194K) from ₹5,000 to ₹10,000, and redefining thresholds for lottery winnings, commissions, and professional fees. Notable changes include transitioning Section 194B to apply TDS on individual transactions exceeding ₹10,000, as opposed to aggregate amounts, and raising the rent threshold under Section 194I to ₹50,000 per month. These amendments aim to streamline TDS processes and reduce administrative burdens. All changes will take effect from April 1, 2025.
Budget 2025: TDS threshold rationalization
TDS provisions have various thresholds of amount of payment or amount of income, beyond which tax is required be deducted. It is proposed to rationalize these thresholds as below –
| S. No | Section | Current threshold | Proposed threshold |
| 1. | 193 – Interest on securities | Nil | Rs. 10,000/- |
| 2. | 194A – Interest other than Interest on securities | (i) Rs. 50,000/- for senior citizen;
(ii) Rs. 40,000/- in case of others when payer is bank, cooperative society and post office (iii) Rs. 5,000/- in other cases |
(i) Rs. 1,00,000/- for senior citizen
(ii) Rs. 50,000/- in case of others when payer is bank, co- operative society and post office (iii) Rs. 10,000/- in |
| 3. | 194 – Dividend for an individual shareholder | Rs. 5,000/- | Rs. 10,000/- |
| 4. | 194K – Income in respect of units of a mutual fund or specified company or undertaking |
Rs. 5,000/- | Rs. 10,000/- |
| 5. | 194B – Winnings from lottery, crossword puzzle, etc. | Aggregate of amounts exceeding Rs. 10,000/- during the financial year | Rs. 10,000/- in respect of a single transaction |
| 6. | 194BB – Winnings from horse race | ||
| 7. | 194D – Insurance commission | Rs. 15,000/- | Rs. 20,000/- |
| 8. | 194G – Income by way of commission, prize etc. on lottery tickets | Rs. 15,000/- | Rs. 20,000/- |
| 9. | 194H – Commission or brokerage | Rs. 15,000/- | Rs. 20,000/- |
| 10. | 194-I Rent | Rs. 2,40,000/- during the financial year | Rs. 50,000/- per month or part of a month |
| 11. | 194J – Fee for professional or technical services | Rs. 30,000/- | Rs. 50,000/- |
| 12. | 194LA – Income by way of enhanced compensation | Rs. 2,50,000/- | 5,00,000/- |
Section 193 – Interest on securities
Section 193 of the Act requires that any person responsible for paying to a resident any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier, deduct income-tax at the rates in force on the amount of the interest payable. Currently there is no threshold for amount of income by way of interest for deduction of tax at source in this section.
2. Proviso to the section provides for non-deduction of tax at source in certain cases. Clause (v) of the proviso states that no tax is required to be deducted on any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if the amount of interest or, as the case may be, the aggregate amount of such interest, paid or likely to be paid, through an account payee cheque, on such debenture during the financial year by the company does not exceed Rs. 5,000/-.
3. It is proposed to provide that tax shall be deducted under this section only when the amount or the aggregate of amounts of income by way of interest on securities exceeds Rs. 10,000/- during a financial year and consequentially to amend the proviso accordingly.
4. These amendments will take effect from the 1st day of April 2025.
[Clause 51]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 51 of the Bill seeks to amend section 193 of the Income-tax Act relating to interest on securities.
The said section, inter alia, provides that the person responsible for paying to a resident any income by way of interest on securities shall deduct income-tax at the rates in force on the amount of the interest payable.
Clause (v) of the proviso to the said section provides that no tax is required to be deducted under this section when any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed five thousand rupees and such interest is paid by the company by an account payee cheque.
It is proposed to amend the said section so as to provide that tax is required to be deducted at source as specified therein only when the amount or the aggregate of amounts exceed ten thousand rupees during the financial year.
It is further proposed to amend clause (v) of the proviso to the said section so as to provide that no tax is required to be deducted therein if the amount of interest paid or likely to be paid does not exceed ten thousand rupees.
These amendments will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
51. Amendment of section 193.
In section 193 of the Income-tax Act,
(a) after the words “whichever is earlier,”, the words “being the amount or the aggregate of amounts exceeding ten thousand rupees during the financial year,” shall be inserted;
(b) in the proviso, in clause (v), in sub-clause (a), for the words “five thousand rupees”, the words “ten thousand rupees” shall be substituted.
