Summary: Income Tax Bill 2025 was introduced in Parliament on February 13, 2025, as announced by Finance Minister Smt. Nirmala Sitharaman during her budget speech on February 1, 2025. This proposed bill aims to simplify and modernize the tax structure, replacing the current Income Tax Act of 1961, which itself replaced the original Income Tax Act of 1922. Key amendments focus on TDS and TCS provisions to enhance taxpayer compliance and ease of doing business. The bill proposes increasing threshold limits for various TDS sections, including interest on securities (Rs. 10,000), dividends (Rs. 10,000), and professional fees (Rs. 50,000). TDS on winnings from lotteries and horse races remains at 30% but will now apply per transaction. Additionally, the TDS rate on payments from securitization trusts under Section 194LBC is reduced to 10% for all taxpayers. For TCS, amendments under Section 206(1G) increase the threshold for remittances under the Liberalized Remittance Scheme (LRS) from Rs. 7,00,000 to Rs. 10,00,000. TCS will no longer apply to education loans under Section 80E. Moreover, Section 206(1H), which mandates TCS on the sale of goods above Rs. 50 lakhs, will be removed to reduce compliance burdens, while Section 194Q remains applicable for buyers exceeding Rs. 10 crores in turnover. These amendments take effect from April 1, 2025, aiming for a more transparent and efficient tax system.
Provisions relating to TDS and TCS:
Rationalization of TDS Rates:
To enhance ease of doing business and promote better taxpayer compliance, it is proposed to increase the threshold limits and rates in respect of following transactions.
| Section | Nature of Income | Rate of TDS | Current Threshold Limit | Proposed Threshold Limit |
| 193 | Interest on Securities | 10% | NIL (For eligible debenture: Rs. 5,000 p.a.) | Rs. 10,000 p.a. |
| 194 | Dividend | 10% | Rs. 5,000 p.a. | Rs. 10,000 p.a. |
| 194A | Interest (Other than Securities) – Senior Citizen | 10% | Rs. 50,000 p.a. | Rs. 1,00,000 p.a. |
| 194A | Interest (Other than Securities) – Others | 10% | Rs. 40,000 p.a. | Rs. 50,000 p.a. |
| 194A | Interest (Other than Securities – Bank, Co-op Society, Post Office) | 10% | Rs. 5,000 p.a. | Rs. 10,000 p.a. |
| 194B | Winnings from Lottery, Crossword Puzzle, etc. | 30% | Rs. 10,000 p.a. | Rs. 10,000 per transaction |
| 194BB | Winnings from Horse Race | 30% | Rs. 10,000 p.a. | Rs. 10,000 per transaction |
| 194D | Insurance Commission | 5% (Individuals), 10% (Companies) | Rs. 15,000 p.a. | Rs. 20,000 p.a. |
| 194G | Income from Commission, Prize, etc., on Sale of Lottery Tickets | 2% | Rs. 15,000 p.a. | Rs. 20,000 p.a. |
| 194H | Commission or Brokerage | 5% | Rs. 15,000 p.a. | Rs. 20,000 p.a. |
| 194I | Rent (Plant & Machinery) | 2% | Rs. 2,40,000 p.a. | Rs. 50,000 per month or part of the month |
| 194I | Rent (Other than P&M) | 10% | Rs. 2,40,000 p.a. | Rs. 50,000 per month or part of the month |
| 194J | Fee for Professional or Technical Services | 10% | Rs. 30,000 p.a. | Rs. 50,000 p.a. |
| 194K | Income in respect of Units | 10% | Rs. 5,000 p.a. | Rs. 10,000 p.a. |
| 194LA | Income by way of Enhanced Compensation | 10% | Rs. 2,50,000 p.a. | Rs. 5,00,000 p.a. |
Note: The limit for any remuneration, fees or commission paid to a director of a company remains unchanged at Rs.30,000 u/s 194J
Further in respect of following, TDS rate is proposed to be reduced.
194LBC Payment in respect of investment in securitization trust, up to Rs. 5,000 p.a. TDS @25% for individual and HUF while 30% for others has been reduce for both the categories to 10%
All the aforesaid amendments will take effect from 1st April, 2025.
Rationalization of TCS provisions for payments made under “LRS of RBI”.
Section 206(1G) provides for collection of TCS by:
- An authorized dealer, who receives an amount, for remittance from buyer, being a person remitting such amount under the LRS; or
- A seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchase such package.
As per the current provisions, TCS is required to be made if the total value of the transection exceeds Rs.7,00,000 in financial year. It is propose to increase the threshold limit from Rs.7,00,000 to Rs.10,00,000.
Further it is proposed that no TCS is to be made if the amount being remitted out is a loan obtained from any financial institution as defined in Sec.80E, for the purpose of pursuing any education. Currently, TDS is to be deducted at 0.5% on such transection exceeding the threshold limit of Rs.7,00,000 in a financial year.
Financial Institution means:
- A banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies; or
- Any other financial institution which the Central Government may, by notification in the official Gazett, specify in this behalf, such as HDFC Limited, Credila Financial Services Pvt.Ltd. etc.
These amendments will take effect from 1st April, 2025.
Omission of TCS on sale of specified Goods:
Presently, Section 206(1H) provides that a seller who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding Rs 50 lakhs in any previous year shall at the time of receipt of such amount, collect TCS at 0.10% on amount exceeding Rs.50lakhs from the buyer.
Section 206(1H) mandates TCS by a seller while Section 194Q provides for TDS by a buyeron the same transection. However, Section 206C(1H) provides that if buyer is liable to deduct TDS under any other provision of this Act on the goods purchased from the seller and has deducted such amount then TCS is not required on such transection.
Therefore to facilitate ease of doing business and reduce compliance burden on the taxpayers, it is proposed that provision of Section 206C(1H) will not be applicable from 1st April, 2025 onwards.
Section 194Q is continued to be applicable on buyer whose total sale, gross receipt or turn over from the business carried on by him exceed Rs.10 crores during the immediately preceding financial year.
This amendment will take effect from 1st April, 2025.
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