Budget 2025: TDS and TCS Rationalization

The Budget 2025 has proposed the rationalization of the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions to simplify tax compliance and ease the burden on taxpayers and businesses. This includes revised TDS thresholds for various payments, higher TCS limits on foreign remittances, and the removal of certain overlapping tax provisions. Additionally, measures have been introduced to reduce compliance requirements, eliminate higher TDS/TCS rates for non-filers, and provide relief from prosecution in specific cases of delayed TCS payments.

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 per the Table given below –

Sl. 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;	(i) Rs. 1,00,000/- for senior citizen
(ii) Rs. 40,000/- in case of others when payer is bank, cooperative society and post office	(ii) Rs. 50,000/- in case of others when payer is bank, co-operative society and post office
(iii) Rs. 5,000/- in other cases	(iii) Rs. 10,000/- in other cases
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/-

TCS on Remittance under LRS

The threshold to collect tax at source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) is proposed to be increased from Rs 7 lakh to Rs 10 lakh. It is also proposed to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution.

Reduction in compliance burden by omission of TCS on sale of specified goods

Sub-section (1H) of section 206C of the Act, requires any person being a seller who receives consideration for sale of any goods of the value or aggregate of value exceeding Rs 50 lakhs in any previous year, to collect tax from the buyer at the rate of 0.1% of the sale consideration exceeding Rs 50 lakhs, subject to certain conditions.

To facilitate ease of doing business and reduce compliance burden on the taxpayers, it is proposed that provisions of sub-section (1H) of section 206C of the Act will not be applicable from the 1st day of April, 2025. This will ensure that both TDS under Sec 194Q and TCS under sub-section (1H) of section 206C was not made applicable on the same transaction.

Removal of higher TDS/TCS for non-filers of return of income

Section 206AB of the Act, requires deduction of tax at higher rate when the deductee specified therein is a non-filer of income-tax return. Section 206CCA of the Act, requires for collection of tax at higher rate when the collectee specified therein is a non-filer of income-tax return. This is subject to other conditions specified in the two sections.

To reduce compliance burden for the deductor/collector, it is proposed to omit section 206AB of the Act and section 206CCA of the Act.

Exemption from prosecution for delayed payment of TCS in certain cases

Section 276BB of the Act provides for prosecution in case of failure to pay the tax collected at source to the credit of Central Government. The provision of the said section states that if a person fails to pay to the credit of the Central Government, the tax collected by him as required under the provisions of section 206C of the Act, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

It is proposed to amend section 276BB of the Act to provide that the prosecution shall not be instituted against a person covered under the said section, if the payment of the tax collected at source has been made to the credit of the Central Government at any time on or before the time prescribed for filing the quarterly statement under proviso to sub-section (3) of section 206C of the Act in respect of such payment.

Still have questions about the new TDS and TCS changes in Budget 2025? Talk to our tax experts at IndiaFilings and get a clear understanding of the revised thresholds, compliance updates, and their impact on your business.

Get expert guidance today!

Back to Learn

Frequently Asked Questions

Common questions about TDS and TCS Rationalization in Budget 2025 for India.

A: The Budget 2025 has proposed the rationalization of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions to simplify tax compliance. This includes revised thresholds for various payments subject to TDS, higher TCS limits on foreign remittances under the Liberalized Remittance Scheme (LRS), and the removal of certain overlapping tax provisions.

A: The Budget 2025 has proposed to increase the TDS thresholds for various types of payments, such as interest on securities, dividends, mutual fund income, insurance commissions, professional fees, and rent. For instance, the TDS threshold for interest on securities has been increased from nil to Rs. 10,000, and the threshold for professional fees has been increased from Rs. 30,000 to Rs. 50,000.

A: The Budget 2025 has proposed to increase the threshold for collecting TCS on remittances under the Liberalized Remittance Scheme (LRS) from Rs. 7 lakh to Rs. 10 lakh. Additionally, TCS will be removed on remittances made for educational purposes if the remittance is funded by a loan from a specified financial institution.

A: To facilitate ease of doing business and reduce compliance burden, the Budget 2025 has proposed to remove the requirement for collecting TCS on the sale of specified goods exceeding Rs. 50 lakhs from April 1, 2025. This will ensure that both TDS under Section 194Q and TCS on the sale of goods are not made applicable to the same transaction.

A: To reduce compliance burden for deductors and collectors, the Budget 2025 has proposed to omit the provisions that require deduction or collection of tax at higher rates when the deductee or collectee is a non-filer of income tax returns. This measure aims to simplify the TDS and TCS processes.

A: The Budget 2025 proposes to amend the relevant section to provide that prosecution shall not be instituted against a person for failure to pay TCS if the payment is made to the government before the due date for filing the quarterly TCS statement. This measure aims to provide relief from prosecution in specific cases of delayed TCS payments.

A: The proposed rationalization measures aim to simplify tax compliance, ease the burden on taxpayers and businesses, reduce compliance requirements, and provide relief from prosecution in certain cases. These measures are expected to facilitate ease of doing business and create a more taxpayer-friendly environment.

A: Businesses and individuals can seek guidance from tax experts at platforms like IndiaFilings to gain a clear understanding of the revised TDS and TCS thresholds, compliance updates, and their impact. Consulting professionals can help ensure smooth implementation and compliance with the new regulations.

A: While the article does not explicitly mention the effective date, it is likely that the proposed changes in TDS and TCS provisions will come into effect from the next financial year, i.e., April 1, 2025, as it is a part of the Budget 2025 proposals.

A: The article does not provide specific details on transitional provisions or grandfathering clauses for existing contracts or agreements that may be affected by the new TDS and TCS regulations. Such details are likely to be clarified once the final provisions are notified by the relevant authorities.