Rohan is a Chartered Accountant having 34 years of expertise in Finance, Accounts and Taxation.
Budget 2025 introduces a series of measures aimed at rationalizing the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions, with a focus on simplifying tax compliance and reducing the burden on both taxpayers and businesses. Key changes include revised TDS thresholds for various types of payments, increased TCS limits on foreign remittances, and the removal of overlapping provisions to streamline the tax framework.
The Budget also proposes steps to ease compliance, such as eliminating higher TDS/TCS rates applicable to non-filers and providing relief from prosecution in specific cases involving delayed TCS payments
TDS Threshold Rationalization – Budget 2025
The TDS provisions under the Income Tax Act specify various threshold limits for different types of payments or income, beyond which tax must be deducted at source. Budget 2025 proposes a rationalization of these thresholds to simplify compliance and align them with current economic realities. The revised thresholds are summarized below:
| Sl. No. | Section | Nature of Payment | Current Threshold | Proposed Threshold |
|---|---|---|---|---|
| 1 | 193 | Interest on securities | Nil | ₹10,000 |
| 2 | 194A | Interest other than on securities | (i) ₹50,000 (senior citizens) (ii) ₹40,000 (others, when payer is bank/co-op/post office) (iii) ₹5,000 (others) | (i) ₹1,00,000 (senior citizens) (ii) ₹50,000 (others, when payer is bank/co-op/post office) (iii) ₹10,000 (others) |
| 3 | 194 | Dividend (individual shareholders) | ₹5,000 | ₹10,000 |
| 4 | 194K | Income from mutual funds or specified companies/undertakings | ₹5,000 | ₹10,000 |
| 5 | 194B | Winnings from lottery, crossword puzzles, etc. | Aggregate > ₹10,000 in a financial year | ₹10,000 per transaction |
| 6 | 194BB | Winnings from horse races | ₹10,000 | ₹20,000 |
| 7 | 194D | Insurance commission | ₹15,000 | ₹20,000 |
| 8 | 194G | Commission/prizes on lottery ticket sales | ₹15,000 | ₹20,000 |
| 9 | 194H | Commission or brokerage | ₹15,000 | ₹20,000 |
| 10 | 194-I | Rent | ₹2,40,000 per financial year | ₹50,000 per month or part thereof |
| 11 | 194J | Fees for professional/technical services | ₹30,000 | ₹50,000 |
| 12 | 194LA | Enhanced compensation on land acquisition | ₹2,50,000 | ₹5,00,000 |
These adjustments aim to reduce the number of low-value transactions subject to TDS, thereby easing the compliance burden for deductors and taxpayers alike
TCS on Remittances under the Liberalized Remittance Scheme (LRS) – Budget 2025
Budget 2025 proposes key changes to the Tax Collected at Source (TCS) provisions for remittances made under the Reserve Bank of India’s Liberalized Remittance Scheme (LRS), aimed at easing the compliance burden for individuals:
Increased Threshold: The threshold for applicability of TCS on foreign remittances under LRS is proposed to be raised from ₹7 lakh to ₹10 lakh in a financial year. Remittances up to ₹10 lakh will now be exempt from TCS, providing relief to small and moderate remitters.
Exemption for Education Loans: TCS will no longer be applicable on remittances made for educational purposes if the remittance is funded through a loan obtained from a financial institution specified under the Income Tax Act. This measure is intended to support students pursuing higher education abroad and reduce their financial burden.
These changes reflect the government’s intention to rationalize the TCS framework while continuing to monitor large-value foreign remittances
Budget 2025: Measures to Reduce TCS Compliance Burden and Simplify Tax Administration
1. Omission of TCS on Sale of Specified Goods (Section 206C(1H))
Under the current provisions of Section 206C(1H) of the Income Tax Act, a seller is required to collect Tax Collected at Source (TCS) at 0.1% on the sale of goods where the aggregate value received from a buyer exceeds ₹50 lakh in a financial year.
To promote ease of doing business and reduce the compliance burden, it is proposed to withdraw the applicability of Section 206C(1H) with effect from April 1, 2025. This change will also avoid duplication of TDS and TCS on the same transaction, particularly in cases where TDS under Section 194Q is already applicable
Removal of Higher TDS/TCS Rates for Non-Filers of Income Tax Returns
Currently, Section 206AB mandates higher TDS rates for certain non-filers of income tax returns, and Section 206CCA imposes higher TCS rates on similar grounds.
To simplify the tax deduction and collection process and reduce administrative complexity for deductors and collectors, it is proposed to omit both Section 206AB and Section 206CCA from the Income Tax Act. This will reduce compliance requirements and potential disputes around determining return-filing status
Relief from Prosecution for Delayed TCS Payment in Certain Cases (Section 276BB Amendment)
As per Section 276BB of the Act, failure to remit TCS to the Central Government can attract prosecution with rigorous imprisonment ranging from three months to seven years, along with a fine.
To provide relief in genuine cases of delay, it is proposed to amend Section 276BB to exempt prosecution if the TCS amount is deposited on or before the due date for filing the quarterly TCS return, as specified under the proviso to Section 206C(3). This measure aims to distinguish willful defaults from procedural delays and ease the burden on compliant taxpayers
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