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 –

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. 

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