TDS Rule Changes from 1st April 2025 

The Budget 2025 has brought significant reforms to the Tax Deduction at Source (TDS) provisions under the Income Tax Act, 1961, aiming to simplify compliance for businesses and individuals. These amendments primarily focus on raising threshold limits and introducing new provisions to enhance efficiency and ease the taxation process. This article provides a clear and concise overview of the key TDS changes, making it easier to understand.

Key TDS Changes Effective from April 1, 2025

The Budget 2025 has introduced enhanced threshold limits for TDS, ensuring that smaller transactions remain exempt from tax deduction, thereby reducing the compliance burden. These revised limits, effective from April 1, 2025, apply to various sections of the Income Tax Act, 1961.

Here’s a summary of the updated TDS threshold limits:

Major Highlights of the TDS Amendments

Here are the key changes in the TDS rules effective from April 1, 2025.

Higher TDS Exemption for Senior Citizens

Senior citizens will benefit from an increased TDS exemption limit on interest earned from fixed deposits (FDs) and recurring deposits (RDs). The threshold has been raised from Rs 50,000 to Rs 1 lakh per financial year. This means that banks will deduct TDS only if the total interest earnings exceed Rs 1 lakh. Those earning below this limit will be exempt from TDS deductions, allowing them to retain more of their income.

Revised TDS Limits for Regular Depositors

For non-senior citizens, the government has increased the TDS threshold on interest income from Rs 40,000 to Rs 50,000 per financial year. 

This change will benefit individuals who rely on interest earnings from bank deposits, as TDS will only be deducted when annual interest earnings surpass Rs 50,000.

Simplified TDS Rules for Gaming Winnings

The government has restructured TDS regulations on lottery winnings, crossword puzzles, and horse racing. Previously, TDS was deducted when total winnings exceeded Rs 10,000 in a financial year. Under the new rules, effective from April 1, 2025, TDS will only be applicable on individual winnings exceeding Rs 10,000. 

For example, if a person wins Rs 8,000 three times, totaling Rs 24,000, no TDS will be deducted as each winning is below the Rs 10,000 threshold. This change simplifies tax deductions for gaming earnings.

Increased Exemption for Insurance and Brokerage Commissions

Insurance agents and brokers will benefit from a higher exemption limit on commission earnings. The TDS threshold has been increased from Rs 15,000 to Rs 20,000 per financial year. This revision aims to improve cash flow for agents and reduce their compliance burden.

Changes in TDS on Investment Income

Investors will see an increase in the TDS exemption threshold for dividend and mutual fund (MF) income. Starting April 2025, TDS will only be deducted if the total dividend or MF earnings exceed Rs 10,000 per financial year, up from the previous threshold of Rs 5,000.

Revised TDS Limits for Rental Income

Landlords will benefit from a significant increase in the TDS threshold for rental income. Earlier, TDS was applicable if annual rental earnings exceeded Rs 2.4 lakh. Under the new rule, the exemption limit has been revised to ₹50,000 per month , providing significant relief to property owners and helping them manage their cash flow more efficiently.

TDS on Partner’s Remuneration – Section 194T

Section 194T was introduced in Budget 2024 to broaden the tax base and enhance compliance among partnership firms and LLPs. This section mandates that TDS be deducted at a rate of 10% on payments made to partners if the total amount exceeds ₹20,000 in a financial year. This provision applies to all forms of payments made to partners, including:

• Remuneration
• Interest on capital
• Commission
• Bonuses
• Salary payments

TDS Applicability Under Section 194T

Key Takeaways

• Ensures tax deduction at source for partner payments, bringing LLPs and firms under stricter tax compliance.
• Applies only if total payments exceed ₹20,000 in a financial year – smaller transactions remain exempt.
• Firms and LLPs must deduct TDS before making payments to partners and deposit it with the tax authorities.

No More Higher TDS for Non-Filers – Section 206AB Removed

Before April 1, 2025:

• Section 206AB mandated a higher TDS rate for individuals who had not filed their Income Tax Returns (ITR) for the past two assessment years and where the total TDS deducted exceeded ₹50,000 in each year.
• This increased compliance burden for businesses, requiring them to verify whether the deductee was a non-filer before applying the correct TDS rate.

From April 1, 2025:

• Section 206AB has been removed, meaning businesses no longer need to check whether the payee has filed their ITR before deducting TDS.
• Standard TDS rates will apply to all transactions without requiring verification of tax return filing status.

With this change, businesses can focus on regular TDS compliance without additional verification steps, making tax deduction processes more efficient.

Conclusion

The introduction of these TDS rule changes aims to reduce compliance burdens and provide financial relief to various taxpayer groups. Understanding and adhering to the revised thresholds, along with the removal of outdated provisions, is crucial for smooth tax compliance. Businesses and individuals must stay updated on these changes to avoid penalties and ensure efficient financial planning.

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