Changes in TDS & TCS Rates Effective from April 1, 2025.

Changes in TDS & TCS Rates Effective from April 1, 2025

Introduction

Effective from April 1, 2025, several changes in Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) will come into effect as per the latest amendments in the Income Tax Act. These changes will impact taxpayers, businesses, and financial institutions by altering exemption limits and applicable rates on various transactions. Understanding these modifications is essential for compliance and financial planning. These amendments can be tracked through the Finance Act 2025 and CBDT notifications.

Key Changes in TDS Rates & Exemptions

1. TDS on Partners' Remuneration, Interest, and Commission

• New Rule: TDS at 10% will be applicable on remuneration, commission, and interest paid to partners if the total payment exceeds Rs20,000.
• Old Rule: No TDS was applicable on such payments.

2. TDS on Interest on Securities (Section 193)

• New Exemption Limit: Rs 10,000.
• Old Exemption Limit: Rs 5,000.

3. TDS on Interest (Other than Interest on Securities) (Section 194)

For Senior Citizens:

• New Limit: Rs 1,00,000.
• Old Limit: Rs 50,000.

For Other Individuals:

• New Limit: Rs 50,000.
• Old Limit: Rs 40,000.

For Interest Paid by Others (excluding banks and post offices):

• New Limit: Rs 10,000.
• Old Limit: Rs 5,000.

4. TDS on Dividend (Section 194)

• New Exemption Limit: Rs 10,000.
• Old Exemption Limit: Rs 5,000.

5. TDS on Insurance Commission (Section 194D)

• New Exemption Limit: Rs 20,000.
• Old Exemption Limit: Rs 15,000.

6. TDS on Commission (Section 194H)

• New Exemption Limit: Rs 20,000.
• Old Exemption Limit: Rs 15,000.

7. TDS on Professional Fees (Section 194J)

• New Exemption Limit: Rs 50,000.
• Old Exemption Limit: Rs 30,000.

8. TDS on Rent (Section 194I)

• New Rule: Applicable if rent exceeds Rs 50,000 per month.
• Old Rule: Applicable if rent exceeds Rs 2,40,000 per annum.

9. Removal of Higher TDS/TCS for Non-Filers

• Sections 206AB & 206CCA (Higher TDS/TCS for Non-Filers) have been omitted.

Key Changes in TCS Rates & Exemptions

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

• New Rule: Omitted to avoid double taxation where TDS under Section 194Q is applicable.
• Old Rule: 0.1% TCS applied on sale of goods exceeding Rs50 lakh.

2. TCS on Foreign Remittances under LRS

New Rate:

• 5% for remittances above Rs 7 lakh for education/medical purposes.
• 20% for other remittances beyond Rs 7 lakh.

Old Rate:

• 5% for remittances exceeding Rs 7 lakh (all categories).

3. TCS on Overseas Tour Packages

• New Rate: 20% (No threshold limit).
• Old Rate: 5% (above Rs 7 lakh threshold).

Comparative Table of Old vs. New TDS/TCS Rates & Exemptions 

Conclusion

With these amendments in TDS and TCS regulations taking effect from April 1, 2025, taxpayers must stay updated to ensure compliance and avoid penalties. The changes in exemption limit offer relief to taxpayers, while the removal of certain TCS provisions aims to simplify transactions. Businesses should update their tax deduction systems accordingly and plan their transactions efficiently to mitigate additional tax burdens.

These amendments can be tracked through the Finance Act 2025 and CBDT notifications, which provide official details and updates on TDS and TCS provisions.

By CA Kavita Dhingra