New TDS and TCS Rules 2025
The Union Budget 2025 has introduced several crucial changes in TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rules. These reforms aim to simplify compliance processes, reduce complexities, and improve cash flow management for both taxpayers and businesses. The new provisions will be applicable from April 1, 2025, for the Assessment Year (AY) 2025-26 onwards.
Understanding TDS and TCS
- TDS (Tax Deducted at Source): A mechanism where tax is deducted at the source of income by the payer and deposited with the government.
- TCS (Tax Collected at Source): A tax collected by the seller from the buyer on specified transactions.
Key TDS Changes in Budget 2025
The following are the major updates in TDS rules:
- Cryptocurrency Transactions
- Transactions involving cryptocurrency or NFTs will now attract 1% TDS under Section 194S. This aligns with India’s growing digital asset regulations.
- Example: If you purchase Bitcoin worth ₹2 lakh, a TDS of ₹2,000 will be deducted at the time of transaction.
- Freelancers and Gig Workers
- TDS under Section 194J will apply at 5% for payments exceeding ₹50,000 (previously ₹1 lakh).
- Example: A freelancer earning ₹6 lakh annually will now face a TDS deduction of ₹30,000, up from ₹25,000.
- Online Marketplaces
- E-commerce platforms like Amazon and Flipkart must deduct 1% TCS on all seller transactions, regardless of the transaction value.
- This ensures improved compliance, even for small-value sales.
- Joint Property Purchases
- Buyers purchasing property jointly must furnish PAN details of all co-owners. Failing to do so will attract a flat 20% TDS on the transaction value.
- Income from Securitisation Trusts
- TDS under Section 194LBC has been reduced from 25%/30% to 10% to provide relief to investors.
- Senior Citizens’ Interest Income
- The TDS exemption limit on interest income for senior citizens has been increased to ₹1 lakh (previously ₹50,000).
- Other Individuals’ Interest Income
- The TDS exemption limit has increased from ₹40,000 to ₹50,000.
- Rental Income
- The TDS exemption limit on rental income has been raised from ₹2.4 lakh to ₹6 lakh per year (equivalent to ₹50,000 per month).
- Dividends and Mutual Fund Income
- The TDS exemption limit has been raised from ₹5,000 to ₹10,000, benefiting stock and mutual fund investors.
Key TCS Changes in Budget 2025
The following are the major updates in TCS rules:
- Foreign Remittances (LRS)
- TCS on foreign remittances under the Liberalized Remittance Scheme (LRS) has been increased from 20% to 22% for amounts exceeding ₹7 lakh annually.
- Threshold Increase for Remittances
- The TCS threshold for remittances under LRS and overseas tour packages has increased from ₹7 lakh to ₹10 lakh.
- Education Loan Remittances
- No TCS will apply to education loan payments made under Section 80E(3)(b) when sent to recognized institutions abroad.
Key Changes in Higher TDS/TCS for Non-Filers
- Section 206AB (higher TDS for non-filers) and Section 206CCA (higher TCS for non-filers) have been omitted. This move simplifies compliance by removing additional penalties for non-filers in specific cases.
Impact on Taxpayers
The new TDS and TCS changes will have a direct impact on various groups:
- Families sending ₹15 lakh abroad for education or travel will now pay ₹33,000 as TCS (up from ₹30,000 previously).
- Cryptocurrency Investors purchasing ₹2 lakh worth of Bitcoin will face a ₹2,000 TDS deduction, reducing liquidity.
- Freelancers earning ₹6 lakh annually will see an increased upfront TDS of ₹30,000 (up from ₹25,000).
- Small Online Sellers may experience reduced working capital due to the 1% TCS deduction on every sale, even for transactions as low as ₹500.
- Joint Property Buyers risk facing double deductions if all PAN details are not furnished correctly.
Conclusion
The new TDS and TCS rules aim to simplify tax compliance, improve cash flow, and promote transparency. Taxpayers are advised to review these changes carefully to avoid unexpected deductions and ensure their financial planning aligns with the revised regulations. Consulting a qualified tax professional can provide valuable insights and help individuals adapt effectively to these new rules.
For More Information : https://taxgyany.com/