The government is going to change the rules of TDS and TCS, which will come into effect from April 1, 2025. These changes were announced in Budget 2025. These changes will affect taxpayers.
These focus on senior citizens, investors and commission earners. The purpose of these changes is to simplify the tax process for taxpayers and businessmen by removing difficult things. Let us see how these changes will benefit different categories.
Income
Senior citizens will now be exempted from TDS on interest income of up to Rs 1 lakh per year, which is much higher than the previous limit of Rs 50,000. Meanwhile, the TDS exemption limit for general citizens has been increased from Rs 40,000 to Rs 50,000. This also includes interest income earned from fixed deposits (FDs) and recurring deposits (RDs) and other such options.
Tax
Senior citizens can now avail tax exemption of up to Rs 15,000 depending on their tax bracket. Apart from this, the limit of TDS exemption on rental income has been increased from Rs 2.4 lakh to Rs 6 lakh per annum or Rs 50,000 per month. Whereas the previous limit was Rs 20,000 per month.
Stocks and Mutual Funds
Investors in stocks and mutual funds will also benefit from the increased TDS exemption on dividends and income from mutual fund units or specified companies, which has been raised from Rs 5,000 to Rs 10,000. Apart from this, individuals involved in cross-border transactions (i.e. transactions between two countries) will benefit from the changed TCS limit under the Liberalised Remittance Scheme (LRS), which has been raised from Rs 7 lakh to Rs 10 lakh. Meanwhile, education loans obtained from certain institutions will now be exempt from TCS at all.
Lottery
The government has also increased the TDS limit for income from lotteries, crossword puzzles and horse races. It is now more than Rs 10,000 per annum. Under the previous rules, TDS was applicable when the total winnings exceeded Rs 10,000 per annum, even if received in several smaller amounts. With the new rules, TDS will be deducted only when a single transaction exceeds Rs 10,000.
Insurance and Brokerage Commissions
Budget 2025 has increased the TDS limit for various commissions, providing relief to insurance agents and brokers. The TDS limit for insurance commission has been increased from Rs 15,000 to Rs 20,000, which will be effective from April 1, 2025. These changes are aimed at simplifying compliance requirements and improving cash flow for small income earners in these industries.
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