New TDS and TCS Rules from 1st April 2025
Beginning April 1, 2025, the Finance Bill 2025 introduces several changes to Tax Deducted at Source (TDS) rules. Here is a table summarizing the key changes:
TDS On Salary from 01.04.2025 AY 2026-27
Slab Rates in New Tax Regime AY 2026-27
The tax slab rates for the new tax regime for the assessment year 2026-27 are as follows:
| Income | Tax Rate |
|---|---|
| Up to ₹ 4,00,000 | Nil |
| Between ₹ 4,00,001 and ₹ 8,00,000 | 5% |
| Between ₹ 8,00,001 and ₹ 12,00,000 | 10% |
| Between ₹ 12,00,001 and ₹ 16,00,000 | 15% |
| Between ₹ 16,00,001 and ₹ 20,00,000 | 20% |
| Between ₹ 20,00,001 and ₹ 24,00,000 | 25% |
| Above ₹ 24,00,000 | 30% |
Slab Rates in Old Tax Regime AY 2025-26
| Net income range (INR) | Resident Super Senior Citizen | Resident Senior Citizen | Any other Individual |
| Up to 2,50,000 | Nil | Nil | Nil |
| 2,50,001-3,00,000 | Nil | Nil | 5% |
| 3,00,001-5,00,000 | Nil | 5% | 5% |
| 5,00,001-10,00,000 | 20% | 20% | 20% |
| Above 10,00,000 | 30% | 30% | 30% |
Note: ‘Super senior citizen’ means an individual whose age is 80 years or more at any time during the relevant previous year. ‘Senior citizen’ means an individual whose age is 60 years or more at any time during the relevant previous year but less than 80 years on the last day of the previous year.
- Surcharge: Applicable at different rates based on income levels.
- Health & Education cess @4%.
TDS Other than Salary from 01.04.2025
| Category | Section | Nature of Income | Current Threshold (INR) | Proposed Threshold (INR) from 01.04.2025 |
|---|---|---|---|---|
| Threshold Revisions | 193 | Interest on Securities | Nil | 10,000 |
| 194A | Interest (Other than Interest on Securities) | (i) 50,000 for senior citizen;
(ii) 40,000 in case of others when payer is bank, cooperative society, and post office; (iii) 5,000 in other cases |
(i) 100,000 for senior citizen;
(ii) 50,000 in case of others when payer is bank, co-operative society, and post office; (iii) 10,000 in other cases |
|
| 194 | Dividend, for an individual shareholder | 5,000 | 10,000 | |
| 194K | Income in Respect of Units of a Mutual Fund | 5,000 | 10,000 | |
| 194-I | Payment of Rent | 240,000 during the Financial Year | 50,000 per month or part of a month | |
| 194J | Payment of Professional Fees/Fees for Technical Services/ Royalty | 30,000 | 50,000 | |
| 194LA | Income by way of enhanced compensation | 2,50,000 | 5,00,000 | |
| 194B | Winnings from lottery, crossword puzzle etc. | Aggregate of amounts exceeding 10,000 during the financial year | 10,000 in respect of a single transaction | |
| 194BB | Winnings from horse race | Aggregate of amounts exceeding 10,000 during the financial year | 10,000 in respect of a single transaction | |
| 194D | Insurance commission | 15,000 | 20,000 | |
| 194G | Income by way of commission, prize etc. on lottery tickets | 15,000 | 20,000 | |
| 194H | Commission or brokerage | 15,000 | 20,000 | |
| Rate Revisions | Income from Investment in Securitization Trust | 25%/30% | 10% | |
| Other Changes | Higher TDS rates for non-filers of income tax returns (Sections 206AB/ 206CCA) | Applicable | Proposed to be removed |
TCS (Tax Collected at Source) as proposed in the Finance Bill 2025:
| Section | Nature of Income | Current Threshold (Rs) | Proposed Threshold (Rs)
from 01.04.2025 |
|---|---|---|---|
| 206C(1H) | TCS on sale of goods | Applicable | Omitted w.e.f. 01-04-2025 |
| 206C(1) | Timber or any other forest produce (not being tendu leaves) obtained under forest lease | 2.5% | 2% |
| 206C(1) | Timber obtained by any mode other than under a forest lease | 2.5% | 2% |
| Definition of “forest produce” | – | Same meaning as defined in any State Act or the Indian Forest Act of 1927 | |
| 206C(1G) | Remittance under LRS & overseas tour package | 7 Lakhs | 10 Lakhs |
| 206C(1G) | Remittance in foreign currency from education loan | 0.5% after 7 lakhs | Nil |
| 206AB/206CCA | Payee fails to furnish return of income for a specified period | Higher rates of deduction of TCS | Provisions proposed to be omitted |
Key points arising from the table and the sources:
- Rationalization of TDS/TCS Compliance: Several threshold limits for TDS and TCS are proposed to be increased, potentially easing the burden of compliance for taxpayers.
- Omission of TCS on Sale of Goods: The proposal to omit TCS on the sale of goods aims to reduce compliance difficulties for sellers.
- Forest Produce: Definition of “forest produce” is clarified, and TCS will apply only to forest produce obtained under a forest lease.
- Liberalized Remittance Scheme (LRS): The increase in the TCS threshold for LRS and the removal of TCS on education loans are intended to provide relief to individuals remitting money for these purposes.
These changes aim to simplify TDS compliance, reduce burdens on taxpayers, and promote ease of doing business.
Example of TCS on Tour Pacakge
- Scenario: An individual purchases an overseas tour package costing INR 12,00,000. The remittance is not for education purposes and is not funded by an education loan.
- Existing TCS (up to March 31, 2025): TCS applies to remittances exceeding INR 7,00,000 @ 20%
- New TCS (from April 1, 2025):
- TCS will be collected on the amount exceeding INR 10,00,000.
- The applicable TCS rate is 20% on the amount exceeding INR 10,00,000.
- Calculation:
- Amount exceeding INR 10,00,000: INR 12,00,000 – INR 10,00,000 = INR 2,00,000.
- TCS amount: 20% of INR 2,00,000 = INR 40,000.
- Therefore, from April 1, 2025, the buyer of the tour package would pay INR 12,00,000 (tour package cost) + INR 40,000 (TCS) = INR 12,40,000. The tour operator will deposit the TCS amount with the government. The individual can claim credit for this TCS when filing their income tax return.
Here’s a table illustrating the TCS calculations for an overseas tour package before and after April 1, 2025, based on the proposed changes in the Finance Bill 2025 and our previous conversation:
| Feature | Before April 1, 2025 (Existing) | After April 1, 2025 (Proposed) |
|---|---|---|
| Threshold for TCS | Rs 7,00,000 | Rs 10,00,000 |
| TCS Rate | 20% above INR 7,00,000 | 20% above INR 10,00,000 |
| Example Tour Package Cost | Rs 12,00,000 | Rs 12,00,000 |
| Calculation | (Rs 12,00,000 – Rs 7,00,000) * 20% = Rs 1,00,000 | (Rs 12,00,000 – Rs 10,00,000) * 20% = Rs 40,000 |
| Total Amount Payable | Rs 12,00,000 + Rs 1,00,000 = Rs 13,00,000 | Rs 12,00,000 + Rs 40,000 = Rs 12,40,000 |
Key Points:
- The threshold for TCS on overseas tour packages is proposed to increase to INR 10,00,000 with effect from April 1, 2025.
- The TCS rate remains 20% for the amount exceeding INR 10,00,000 [refer 4th provisio of Section 206(1G)].
- The increased threshold will be effective from April 1, 2025.