The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has introduced several key changes in Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) to benefit small taxpayers, senior citizens, and businesses. These measures aim to simplify tax compliance, reduce financial burdens, and promote voluntary tax compliance among individuals and enterprises. This article provides an in-depth analysis of the major changes in TDS and TCS and their impact on small taxpayers.
Key Changes in TDS
1. Increased TDS Limit on Interest for Senior Citizens:
The threshold for TDS on interest earned by senior citizens has been doubled from Rs. 50,000 to Rs. 1,00,000. This means banks will now deduct tax only if the interest income exceeds Rs. 1,00,000 in a year, providing relief to senior citizens with modest interest earnings.
2. Higher TDS Threshold on Rent:
The annual limit for TDS on rent payments has been raised from Rs. 2.40 lakh to Rs. 6 lakh. This change benefits small taxpayers who receive rental income, as tax will now be deducted only if the annual rent exceeds Rs. 6 lakh.
Key Changes in TCS
1. Increased TCS Threshold:
The threshold for TCS has been increased to Rs. 10 lakh. This means that tax will be collected at source only when the transaction value exceeds Rs. 10 lakh, reducing the compliance burden for small businesses.
2. Decriminalization of TCS Payment Delays:
Following the earlier decriminalization of delays in TDS payments, the government has now decriminalized delays in TCS payments as well. This move aims to encourage voluntary compliance without the fear of criminal charges for delays.
Encouraging Voluntary Compliance
To make tax filing easier, the government has also introduced changes in tax return filing:
Extended Time Limit for Updated Tax Returns
• Previously, taxpayers could file updated returns only within 2 years of the relevant financial year.
• New Update: The time limit has been extended to 4 years.
• Impact: This gives taxpayers more time to correct any errors or omissions in their tax filings and ensures compliance without penalties.
Why Are These Changes Important?
The government’s new tax reforms aim to reduce the burden of compliance on small taxpayers. Here’s why these changes are crucial:
1. More Savings for Senior Citizens: Higher TDS threshold on interest income allows senior citizens to save more money.
2. Relief for Landlords and Small Businesses: Raising the TDS threshold on rental income reduces unnecessary tax deductions.
3. Encouraging Business Growth: A higher TCS threshold helps small businesses by avoiding unnecessary tax collection.
4. Simplified Tax System: Decriminalization of TCS delays ensures that taxpayers are not harshly penalized for small mistakes.
5. More Time for Taxpayers: Extending the time to file updated tax returns allows taxpayers to fix errors without penalties.
Conclusion
These reforms in TDS and TCS are designed to simplify the tax system and provide relief to small taxpayers and senior citizens. The government by increasing the thresholds and decriminalizing certain delays, it aims to reduce the compliance burden and encourage timely tax payments.
