New income tax bill has changed the TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rules several times. These changes were announced in Budget 2025 and will be effective from April 1, 2025. The bill has proposed increasing the threshold limit of tax for various provisions. TDS is applicable to various payments based on specified thresholds and rates. These reforms aim to ease tax compliance for taxpayers and traders, eliminating unnecessary complexities.
One of the key changes is the increase in TCS on foreign remittances under the Liberalized Remittance Scheme (LRS), which has risen from 20% to 22% for amounts over ₹7 lakh per year. This will impact overseas education, travel, and investments. Cryptocurrency/NFT transactions are now subject to 1% TDS under Section 194S, which aligns with India’s virtual digital asset (VDA) regime. Freelancers and gig workers have higher limits, with 5% TDS (Section 194J) on sums over ₹50,000 (down from ₹1 lakh). Online marketplaces such as Flipkart must deduct 1% TCS on every seller transaction, including low-value sales, boosting compliance costs. Joint property purchasers also need to furnish PAN information of all joint owners to steer clear of a flat 20% TDS on registrations,” said Abbhinav R Jain, Co-founder & Chief Financial Officer of AdCounty Media.
According to Abbhinav R Jain, Co-founder & Chief Financial Officer of AdCounty Media, these new rules will strain cash flow and raise reporting burdens. For instance, a family paying ₹15 lakh for foreign education or travel will now pay ₹33,000 in TCS, compared to ₹30,000 previously. Cryptocurrency investors purchasing ₹2 lakh worth of Bitcoin will see ₹2,000 deducted as TDS, reducing liquidity. Freelancers earning ₹6 lakh annually will have ₹30,000 deducted upfront, up from ₹25,000 before, requiring budget adjustments. Small online sellers, even those making ₹500 in sales, will face a loss of working capital due to the expanded 1% TCS. Joint homebuyers risk double deductions if all PANs are not linked.
Several key TDS/TCS changes for individual taxpayers
- TDS under Section 194LBC on income from a securitisation trust to residents will be reduced from 25%/30% to 10%.
- Section 206AB (higher TDS for non-filers) and Section 206CCA (higher TCS for non-filers) are proposed to be omitted, along with related references in Section 194S.
- TCS under Section 206C(1G): The threshold for remittances under LRS and overseas tour packages will increase from ₹7 lakh to ₹10 lakh.
- No TCS on education loan remittances under Section 80E(3)(b).
These changes will take effect from April 1, 2025, for AY 2025-26 onwards, once the Finance Act 2025 is passed.
TCS, TDS: Changes introduced in Budget 2025
- Under the new provisions, senior citizens will be exempt from TDS on interest income up to ₹1 lakh per year, an increase from the previous limit of ₹50,000.
- The TDS exemption limit has been raised from ₹40,000 to ₹50,000 for other individuals.
- Senior citizens can now avail of a relief of up to ₹15,000, depending on their tax bracket.
- Additionally, the Budget has raised the TDS exemption limit on rental income from ₹2.4 lakh to ₹6 lakh per year, or ₹50,000 per month, up from the earlier ₹20,000 per month.
- Investors in stocks and mutual funds will also benefit from the increased TDS exemption on dividends and income from mutual fund units or specific companies, which has been raised from ₹5,000 to ₹10,000.
- The TCS thresholds have been revised under the Liberalised Remittance Scheme (LRS), benefiting individuals involved in cross-border transactions. The previous limit of ₹7 lakh has been increased to ₹10 lakh, and education loans from certain institutions are now fully exempt.
