TDS and TCS Changes from 1st April 2025

TDS and TCS Changes from 1st April 2025. The Finance Bill of 2025 brought some important changes to the existing provisions related to Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) under the Income Tax Act, 1961. These TDS and TCS Changes were introduced with the aim of simplifying compliance and reducing the procedural burden on taxpayers. These amendments are especially important for partnership firms, businesses involved in large transactions, and individuals who frequently remit funds or receive interest, dividends, and commissions. In this article, we will cover all the important TDS & TCS Changes From April 2025 in detail, including newly introduced sections, enhanced threshold limits, and omitted provisions that previously created confusion and dual compliance.
IncreasedThreshold Limits for TDS Provisions
The Income Tax Act mandates that TDS is to be deducted only when a certain transaction exceeds the prescribed threshold limit. With effect from April 1, 2025, the government has increased several of these threshold limits under various TDS sections to minimize unnecessary deductions on smaller transactions. For instance, the threshold under Section 194A for interest (other than on securities) has now doubled for senior citizens—from Rs. 50,000 to Rs. 1,00,000. For others dealing with banks, co-operative societies, and post offices, the limit has been increased from Rs. 40,000 to Rs. 50,000, while in other cases it is now Rs. 10,000. Similarly, under Section 194 - Dividend, the threshold for deduction has been raised from Rs. 5,000 to Rs. 10,000. This change is particularly beneficial to small retail investors who receive limited dividend income.
The detailed changes in threshold limits under TDS are:

Section 193 (Interest on Securities): From NIL to Rs. 10,000

Section 194A (Interest other than on securities):

Senior Citizens: Rs. 1,00,000

Others (banks, co-operatives, post offices): Rs. 50,000

Other cases: Rs. 10,000

Section 194 (Dividend): From Rs. 5,000 to Rs. 10,000

Section 194K (Mutual Fund Units): From Rs. 5,000 to Rs. 10,000

Sections 194B/194BB (Winnings from lotteries and horse races): Changed to apply on aggregate winnings exceeding Rs. 10,000 in a financial year

Section 194D (Insurance Commission): Increased from Rs. 15,000 to Rs. 20,000

Section 194G (Lottery ticket commissions): From Rs. 15,000 to Rs. 20,000

Section 194H (Brokerage/Commission): From Rs. 15,000 to Rs. 20,000

Section 194-I (Rent): From Rs. 2.4 lakhs annually to Rs. 50,000 monthly

Section 194J (Professional/Technical Services): From Rs. 30,000 to Rs. 50,000

Section 194LA (Compensation): From Rs. 2.5 lakhs to Rs. 5 lakhs

These enhanced thresholds will help small businesses and individuals avoid unnecessary deductions and reduce the compliance load involved in claiming TDS refunds.
Enhanced Threshold Limits for TCS Provisions
Just like TDS, TCS is also applicable only when a certain threshold is exceeded. As per the TDS & TCS Changes From April 2025, the threshold for Liberalised Remittance Scheme (LRS) and foreign tour packages has been increased from Rs. 7 lakhs to Rs. 10 lakhs. This means if an individual remits or spends below this amount, no TCS will be collected.
Furthermore, TCS on remittances made under LRS for educational purposes through education loans has been removed altogether. This will significantly reduce the financial burden for students and parents availing educational loans.
The enhanced TCS thresholds are as follows:

Section 206C(1G) – LRS & foreign tours:

Previous: Rs. 7,00,000

Now: Rs. 10,00,000

Section 206C(1G) – Education loan remittance under LRS:

Previous: Rs. 7,00,000

Now: NIL (Exempt from TCS)

Section 206C(1H) – Sale of Goods:

Previous: Rs. 50,00,000

Now: NIL (Removed from April 1, 2025)

These updates will help streamline the compliance requirements for travel agencies, educational institutions, and individuals making international transactions.
Introduction of Section 194T – TDS on Partner’s Remuneration
A significant inclusion in the list of TDS & TCS Changes From April 2025 is Section 194T, which mandates TDS on payments made by partnership firms and LLPs to their partners. This includes remuneration, interest, commission, bonus, and salary. If the total payments made to a partner exceed Rs. 20,000 in a financial year, the firm or LLP is required to deduct TDS at 10%. This provision aims to bring transparency and uniformity in tax compliance related to partner payouts. It also helps in increasing the reporting of partnership income and ensuring fair tax collections.

Threshold Limit: Rs. 20,000 per financial year

TDS Rate: 10%

This section is important for both tax consultants and firms to avoid default penalties for non-deduction.
Removal of TCS on Sale of Goods – Section 206C(1H)
Prior to the amendment, Section 206C(1H) required sellers to collect TCS on the sale of goods where the aggregate value exceeded Rs. 50 lakhs. This provision often overlapped with Section 194Q, which required buyers to deduct TDS under similar conditions. From April 1, 2025, Section 206C(1H) stands removed, eliminating the TCS compliance burden for sellers and reducing the confusion arising from dual TDS/TCS applicability on the same transaction. This change will help streamline transaction reporting and will ease the compliance process, especially for B2B suppliers.
Omission of Sections 206AB & 206CCA – Higher TDS/TCS for Non-Filers Removed
The provisions of Section 206AB and 206CCA earlier mandated a higher rate of TDS and TCS respectively for individuals and entities who did not file income tax returns for the previous two years. While this was meant to improve compliance, it posed operational difficulties for deductors/collectors who had to verify the filing status of recipients before applying the correct rate. Effective from April 1, 2025, both these sections are omitted. Deductors and collectors no longer need to check whether the recipient is a tax return filer, thereby simplifying operational and compliance-related tasks for businesses. This step also brings down the administrative load on tax professionals and reduces errors in return filing.
Reduced TCS Rates on Forest Produce
One of the important TCS amendments introduced is the reduction in TCS rates for forest produce such as timber and other products (excluding tendu leaves) under Section 206C(1). The rate has been decreased from 2.5% to 2%. Moreover, the definition of forest produce will now align with the definition provided under the Indian Forest Act, 1927 or respective State Acts. This clarification will bring consistency in interpretation and application of the provision across different states. This change will benefit traders, contractors, and manufacturers involved in the forest-based products industry.
Benefits of the TDS and TCS Changes from April 2025
These amendments under the Union Budget 2025 for TDS and TCS aim to:

Simplify compliance for businesses and individuals by removing overlapping provisions.

Increase threshold limits to ensure TDS and TCS is not deducted/collected unnecessarily.

Reduce operational burden on tax deductors and collectors.

Encourage honest reporting by eliminating the dual-check requirements for non-filers.

Support education and travel sectors by revising LRS and TCS limits.

Conclusion
The TDS & TCS Changes From April 2025 mark a positive shift towards a more taxpayer-friendly compliance structure. By raising thresholds, removing outdated provisions, and simplifying complex requirements, the government has addressed key concerns of taxpayers and professionals alike. Taxpayers, especially those operating partnership firms, remitting foreign funds, or engaged in commission-based services, must update their systems, agreements, and internal processes to align with the new provisions. Ensuring compliance with these amendments will not only help in avoiding penalties but also in accurate filing and timely refunds.
If you have any questions regarding new changes in TDS and TDS 2025 then you can connect with Compliance Calendar LLP experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.

The Finance Bill of 2025 brought some important changes to the existing provisions related to Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) under the Income Tax Act, 1961. These TDS and TCS Changes were introduced with the aim of simplifying compliance and reducing the procedural burden on taxpayers. These amendments are especially important for partnership firms, businesses involved in large transactions, and individuals who frequently remit funds or receive interest, dividends, and commissions. In this article, we will cover all the important TDS & TCS Changes From April 2025 in detail, including newly introduced sections, enhanced threshold limits, and omitted provisions that previously created confusion and dual compliance.

IncreasedThreshold Limits for TDS Provisions

The Income Tax Act mandates that TDS is to be deducted only when a certain transaction exceeds the prescribed threshold limit. With effect from April 1, 2025, the government has increased several of these threshold limits under various TDS sections to minimize unnecessary deductions on smaller transactions. For instance, the threshold under Section 194A for interest (other than on securities) has now doubled for senior citizens—from Rs. 50,000 to Rs. 1,00,000. For others dealing with banks, co-operative societies, and post offices, the limit has been increased from Rs. 40,000 to Rs. 50,000, while in other cases it is now Rs. 10,000. Similarly, under Section 194 - Dividend, the threshold for deduction has been raised from Rs. 5,000 to Rs. 10,000. This change is particularly beneficial to small retail investors who receive limited dividend income.

The detailed changes in threshold limits under TDS are:

Section 193 (Interest on Securities): From NIL to Rs. 10,000
Section 194A (Interest other than on securities):

Senior Citizens: Rs. 1,00,000
Others (banks, co-operatives, post offices): Rs. 50,000
Other cases: Rs. 10,000

Section 194 (Dividend): From Rs. 5,000 to Rs. 10,000
Section 194K (Mutual Fund Units): From Rs. 5,000 to Rs. 10,000
Sections 194B/194BB (Winnings from lotteries and horse races): Changed to apply on aggregate winnings exceeding Rs. 10,000 in a financial year
Section 194D (Insurance Commission): Increased from Rs. 15,000 to Rs. 20,000
Section 194G (Lottery ticket commissions): From Rs. 15,000 to Rs. 20,000
Section 194H (Brokerage/Commission): From Rs. 15,000 to Rs. 20,000
Section 194-I (Rent): From Rs. 2.4 lakhs annually to Rs. 50,000 monthly
Section 194J (Professional/Technical Services): From Rs. 30,000 to Rs. 50,000
Section 194LA (Compensation): From Rs. 2.5 lakhs to Rs. 5 lakhs

These enhanced thresholds will help small businesses and individuals avoid unnecessary deductions and reduce the compliance load involved in claiming TDS refunds.

Enhanced Threshold Limits for TCS Provisions

Just like TDS, TCS is also applicable only when a certain threshold is exceeded. As per the TDS & TCS Changes From April 2025, the threshold for Liberalised Remittance Scheme (LRS) and foreign tour packages has been increased from Rs. 7 lakhs to Rs. 10 lakhs. This means if an individual remits or spends below this amount, no TCS will be collected.

Furthermore, TCS on remittances made under LRS for educational purposes through education loans has been removed altogether. This will significantly reduce the financial burden for students and parents availing educational loans.

The enhanced TCS thresholds are as follows:

Section 206C(1G) – LRS & foreign tours:

Previous: Rs. 7,00,000
Now: Rs. 10,00,000

Section 206C(1G) – Education loan remittance under LRS:

Previous: Rs. 7,00,000
Now: NIL (Exempt from TCS)

Section 206C(1H) – Sale of Goods:

Previous: Rs. 50,00,000
Now: NIL (Removed from April 1, 2025)

These updates will help streamline the compliance requirements for travel agencies, educational institutions, and individuals making international transactions.

Introduction of Section 194T – TDS on Partner’s Remuneration

A significant inclusion in the list of TDS & TCS Changes From April 2025 is Section 194T, which mandates TDS on payments made by partnership firms and LLPs to their partners. This includes remuneration, interest, commission, bonus, and salary. If the total payments made to a partner exceed Rs. 20,000 in a financial year, the firm or LLP is required to deduct TDS at 10%. This provision aims to bring transparency and uniformity in tax compliance related to partner payouts. It also helps in increasing the reporting of partnership income and ensuring fair tax collections.

Threshold Limit: Rs. 20,000 per financial year
TDS Rate: 10%

This section is important for both tax consultants and firms to avoid default penalties for non-deduction.

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

Prior to the amendment, Section 206C(1H) required sellers to collect TCS on the sale of goods where the aggregate value exceeded Rs. 50 lakhs. This provision often overlapped with Section 194Q, which required buyers to deduct TDS under similar conditions. From April 1, 2025, Section 206C(1H) stands removed, eliminating the TCS compliance burden for sellers and reducing the confusion arising from dual TDS/TCS applicability on the same transaction. This change will help streamline transaction reporting and will ease the compliance process, especially for B2B suppliers.

Omission of Sections 206AB & 206CCA – Higher TDS/TCS for Non-Filers Removed

The provisions of Section 206AB and 206CCA earlier mandated a higher rate of TDS and TCS respectively for individuals and entities who did not file income tax returns for the previous two years. While this was meant to improve compliance, it posed operational difficulties for deductors/collectors who had to verify the filing status of recipients before applying the correct rate. Effective from April 1, 2025, both these sections are omitted. Deductors and collectors no longer need to check whether the recipient is a tax return filer, thereby simplifying operational and compliance-related tasks for businesses. This step also brings down the administrative load on tax professionals and reduces errors in return filing.

Reduced TCS Rates on Forest Produce

One of the important TCS amendments introduced is the reduction in TCS rates for forest produce such as timber and other products (excluding tendu leaves) under Section 206C(1). The rate has been decreased from 2.5% to 2%. Moreover, the definition of forest produce will now align with the definition provided under the Indian Forest Act, 1927 or respective State Acts. This clarification will bring consistency in interpretation and application of the provision across different states. This change will benefit traders, contractors, and manufacturers involved in the forest-based products industry.

Benefits of the TDS and TCS Changes from April 2025

These amendments under the Union Budget 2025 for TDS and TCS aim to:

Simplify compliance for businesses and individuals by removing overlapping provisions.
Increase threshold limits to ensure TDS and TCS is not deducted/collected unnecessarily.
Reduce operational burden on tax deductors and collectors.
Encourage honest reporting by eliminating the dual-check requirements for non-filers.
Support education and travel sectors by revising LRS and TCS limits.

Conclusion

The TDS & TCS Changes From April 2025 mark a positive shift towards a more taxpayer-friendly compliance structure. By raising thresholds, removing outdated provisions, and simplifying complex requirements, the government has addressed key concerns of taxpayers and professionals alike. Taxpayers, especially those operating partnership firms, remitting foreign funds, or engaged in commission-based services, must update their systems, agreements, and internal processes to align with the new provisions. Ensuring compliance with these amendments will not only help in avoiding penalties but also in accurate filing and timely refunds.

If you have any questions regarding new changes in TDS and TDS 2025 then you can connect with Compliance Calendar LLP experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.