TDS Rule Updates April 1, 2025

The Union Budget 2025 has introduced several significant changes to the Tax Deducted at Source (TDS) framework aimed at reducing compliance burdens and offering greater relief to taxpayers. Here are the key highlights:

1. Increased TDS Exemption for Senior Citizens

Senior citizens will now enjoy a higher TDS exemption limit on interest earned from fixed and recurring deposits.

• Previous Limit: ₹50,000 per year

• New Limit: ₹1,00,000 per year
  Banks will deduct TDS only if interest income exceeds ₹1 lakh, allowing senior citizens to retain more of their earnings.

2. Higher Threshold for Regular Depositors

For individuals below 60 years, the threshold for TDS on interest income has been revised:

• Earlier Limit: ₹40,000

• New Limit: ₹50,000
  This revision offers relief to regular depositors who earn modest interest incomes from banks, co-operative societies, or post offices.

3. Simplified TDS Rules on Gaming Winnings

TDS on winnings from lotteries, crossword puzzles, and horse racing has been rationalized:

• Earlier Rule: TDS applied if total winnings exceeded ₹10,000 in a financial year

• New Rule: TDS applies only if each individual transaction exceeds ₹10,000
  For instance, three winnings of ₹8,000 each would not attract TDS under the revised rules.

4. Increased Exemption for Commission Earners

The TDS exemption limit on commissions (insurance, lottery, brokerage, etc.) has been raised:

• Earlier Limit: ₹15,000

• New Limit: ₹20,000
  This change eases the cash flow and compliance pressure on agents and small earners.

5. Higher TDS Threshold on Investment Income

Investors in mutual funds and dividend-yielding stocks will benefit from a revised TDS exemption:

• Earlier Limit: ₹5,000

• New Limit: ₹10,000 per financial year
  TDS will now apply only if total dividend or MF income exceeds ₹10,000 annually.

6. Revised TDS Threshold for Rental Income

Property owners now enjoy a more favorable TDS exemption on rental income:

• Earlier Limit: ₹2.4 lakh per year

• New Limit: ₹50,000 per month
  This change benefits landlords, especially in metro areas, by improving cash flow and reducing tax withholding.

7. New TDS Rule for Partner Payments – Section 194T

Section 194T, introduced in Budget 2024, mandates 10% TDS on various payments made to partners of firms and LLPs:

Key Points:

• Applies to partnership firms and LLPs

• TDS must be deducted before payment

• Only applies if total payments exceed ₹20,000 per year

8. Removal of Higher TDS for Non-Filers – Section 206AB Scrapped

Before April 1, 2025:
Section 206AB imposed a higher TDS rate on those who failed to file their ITRs for the past two years and had TDS above ₹50,000 annually.

From April 1, 2025:
This section has been removed, meaning:

• Businesses no longer need to verify a payee’s ITR filing status

• Standard TDS rates will apply across the board

• Simplifies compliance and reduces administrative burden