The government has introduced significant changes in the tax rules with the Budget 2025 announcement. The new TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rules related to rent, interest, mutual funds, and foreign travel will come into effect from April 1, 2025. These changes are designed to provide relief to taxpayers, and here’s how they will impact your salary, investments, and expenses.
In the 2025 Budget, Finance Minister Nirmala Sitharaman introduced provisions aimed at giving taxpayers a much-needed break. The government has raised the tax-free income limit to Rs 12 lakh under the new tax regime, which means more people will be exempt from taxes. Additionally, there have been changes to the TDS limits for senior citizens on bank and post office deposits, making them more attractive. These changes will come into effect from April 1, 2025.
TDS (Tax Deducted at Source) is a system where tax is deducted directly from the source of income, such as salary, interest, or rent. The deductor (individual or institution responsible for payment) deducts the tax at prescribed rates and deposits it with the government. Similarly, TCS (Tax Collected at Source) applies to specific transactions where tax is collected by the seller at the time of sale.
The government has revised the tax deduction and collection limits, benefiting common taxpayers. Below are the current and new limits for various sources of income:
| Category | Current Limit | New Proposed Limit |
|---|---|---|
| Rent | ₹2.4 lakh | ₹6 lakh |
| Interest on Securities | ₹0 | ₹10,000 |
| Interest from sources other than securities | (i) Senior Citizen: ₹50,000 (ii) Bank/Post Office: ₹40,000 (iii) Other cases: ₹5,000 |
(i) Senior Citizen: ₹1 lakh (ii) Bank/Post Office: ₹50,000 (iii) Other cases: ₹10,000 |
| Amount remitted for education loan abroad (under LRS) | 0.5% above ₹7 lakh | ₹0 |
| Remittance for foreign travel packages (under LRS) | ₹7 lakh | ₹10 lakh |
| Dividends for individual shareholders | ₹5,000 | ₹10,000 |
| Income from mutual fund units or any company/enterprise | ₹5,000 | ₹10,000 |
| Lottery, crossword puzzle, horse race winnings | Above ₹10,000 in a year | ₹10,000 in a single transaction |
| Technical/Professional services payments | ₹30,000 | ₹50,000 |
| Income earned from compensation increases | ₹2.5 lakh | ₹5 lakh |
Reduced Tax Burden on Smaller Amounts: The rent deduction limit has been increased from ₹2.4 lakh to ₹6 lakh, benefiting taxpayers who receive lower rent.
More Exemptions for Interest Income: The limit for interest income for senior citizens has increased from ₹50,000 to ₹1 lakh, allowing them to earn more interest income without tax deduction.
Easier Transactions Abroad: The LRS (Liberalized Remittance Scheme) limit for remittances for education or travel abroad has been raised to ₹10 lakh, which means TCS will not apply to smaller transactions.
Benefits for Freelancers and Small Professionals: The TDS deduction limit for technical and professional services has been increased from ₹30,000 to ₹50,000, benefiting small professionals and freelancers.
Here’s a quick look at the TDS rates applicable on different types of payments for the financial year 2024-2025:
| Section | Type of Payment | TDS Rate (%) |
|---|---|---|
| 192 | Salary Income | As per slab rates |
| 192A | Premature withdrawal of EPF | 10% (30% if PAN is not provided) |
| 193 | Interest on securities | 10% |
| 194 | Dividend | 10% |
| 194A | Interest earned (excluding bank/post office) | 10% |
| 194B | Income from lotteries, games | 30% |
| 194BB | Income from horse racing | 30% |
| 194D | Insurance commission payments | Companies: 10%, Individuals: 5% |
| 194DA | Life insurance policy payout | 5% |
| 194E | Payments to non-resident players | 20% |
| 194H | Brokerage or commission | 5% |
| 194IA | Transfer of immovable property (except agricultural land) | 1% |
| 194J | Technical/Professional Service Fee | 10% or 2% |
In a relief for senior citizens, the Finance Minister announced a TDS exemption for those above 75 years of age. The exemption applies to interest income on bank and post office deposits.
The TDS and TCS revisions in Budget 2025 will provide greater tax relief to individuals, especially for those receiving rent, interest income, or involved in foreign remittances. As these changes come into effect from April 1, 2025, it’s crucial to understand how these adjustments will impact your finances. Whether you're a salaried employee, freelancer, or investor, these revisions are designed to make the tax process smoother and reduce the tax burden on smaller amounts.
