The Union Budget 2025-26 brings notable changes to tax deduction and collection processes, aimed at streamlining compliance and administrative procedures. These amendments focus on revising thresholds, removing redundant provisions, and improving tax administration efficiency for individuals and businesses.
1. Rationalization of TDS Thresholds
The government has proposed adjustments to TDS threshold limits across various sections to provide relief to taxpayers and streamline compliance.
| Category | TDS/TCS Section | Previous Rate/Limit | New Rate/Limit |
|---|---|---|---|
| Interest on Securities | 193 | Nil | Rs. 10,000 |
| Interest Income (Senior Citizens) | 194A | Rs. 50,000 | Rs. 1,00,000 |
| Interest Income (Others) | 194A | Rs. 40,000 (banks) | Rs. 50,000 (banks) |
| Interest Income (Other Cases) | 194A | Rs. 5,000 | Rs. 10,000 |
| Dividend for Individuals | 194 | Rs. 5,000 | Rs. 10,000 |
| Mutual Fund Income | 194K | Rs. 5,000 | Rs. 10,000 |
| Lottery Winnings | 194B | Aggregate > Rs. 10,000 | Rs. 10,000 per transaction |
| Winnings from Horse Races | 194BB | Rs. 10,000 | Rs. 10,000 |
| Insurance Commission | 194D | Rs. 15,000 | Rs. 20,000 |
| Lottery Ticket Commission | 194G | Rs. 15,000 | Rs. 20,000 |
| Brokerage & Commission | 194H | Rs. 15,000 | Rs. 20,000 |
| Rent Payments | 194I | Rs. 2.4 lakh/year | Rs. 50,000 per month |
| Professional/Technical Fees | 194J | Rs. 30,000 | Rs. 50,000 |
| Enhanced Compensation Income | 194LA | Rs. 2,50,000 | Rs. 5,00,000 |
| TCS on Foreign Remittances | 206C(1G) | Rs. 7 lakh | Rs. 10 lakh |
| TCS on Education Remittances | 206C(1G) | 5% | Removed |
| Higher TDS for Non-PAN Cases | Various | Applied broadly | Only for Non-PAN holders |
| TCS Payment Delays | 206C | Strict penalties | Relaxed rules |
| TCS on Sale of Goods | 206C | Applied in some cases | Removed |
Benefit: These revised limits will ensure that fewer individuals and businesses face TDS deductions, thereby improving liquidity and reducing compliance burdens.
2. Removal of TCS on Goods Sales
- Section 206C(1H): Previously, both TDS under Section 194Q and TCS under Section 206C(1H) applied to certain transactions.
- The Budget removes TCS on the sale of goods, preventing double taxation.
3. Adjusted TCS Provisions
The Budget 2025-26 has made notable changes to TCS rules, particularly for foreign remittances under the Liberalized Remittance Scheme (LRS).
- LRS (Section 206C(1G)):
- Previous Limit: Rs. 7,00,000
- New Limit: Rs. 10,00,000
- Benefit: Fewer taxpayers will be subject to TCS on foreign remittances.
- TCS on Education Remittances (Section 206C(1G)):
- Major Relief: TCS has been completely removed for education-related remittances when funded by a loan from a recognized financial institution.
4. Removal of Higher TDS/TCS Rates for Non-Filers
- Section 206AB & 206CCA:
- Previously, non-filers of income tax returns were subject to higher TDS and TCS rates.
- The Budget has removed these higher rates, ensuring a fairer taxation approach.
- Benefit: Reduces the compliance burden and simplifies tax payments.
5. Compliance Simplifications & Decriminalization
The Budget has introduced measures to ease compliance for taxpayers:
- TDS Delays: As of July 2024, delays in TDS payments up to the due date of filing returns have been decriminalized.
- TCS Delays: The same relaxation has now been extended to TCS provisions.
What is the effective date?
The effective date will be 1st April ’25. However, it needs to be passed in the upcoming budget session.