Income Tax Bill 2025: Major Changes in TDS & TCS Provisions

The Income Tax Bill 2025 introduces significant amendments to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), impacting businesses and taxpayers across India. These changes aim to streamline compliance, enhance transparency, and reduce tax evasion. Let’s explore the key updates.

1. Key Changes in TDS (Tax Deducted at Source)

a) Increased Threshold Limits

Interest on Securities (Section 193): TDS deduction threshold increased from NIL (or Rs. 5,000 for eligible debentures) to Rs. 10,000 per annum.
Dividends (Section 194): Threshold limit revised from Rs. 5,000 to Rs. 10,000 per annum.
Professional Fees (Section 194J): The threshold has been elevated to Rs. 50,000 per annum, offering relief to professionals.

b) TDS on Winnings

Lotteries and Horse Races (Section 194B): The TDS rate remains 30%, but it will now apply on a per-transaction basis, simplifying deductions.

c) Securitization Trusts (Section 194LBC)

TDS rate on income from securitization trusts reduced from 25% to 10%, encouraging investment in securitized assets.

2. Key Changes in TCS (Tax Collected at Source)

a) Liberalized Remittance Scheme (LRS)

Threshold Increase (Section 206(1G)): The limit for TCS on foreign remittances under LRS has been raised from Rs. 7,00,000 to Rs. 10,00,000, benefiting individuals sending money abroad.
Education Loans: TCS will not apply to education-related remittances covered under Section 80E, reducing the financial burden on students.

b) Sale of Goods

Section 206(1H) Removed: TCS on sales exceeding Rs. 50 lakhs is eliminated, simplifying compliance for businesses.
Section 194Q Still Applies: TDS remains applicable for buyers with a turnover of over Rs. 10 crores.

3. Implications for Businesses & Taxpayers

Businesses must update their accounting systems to reflect new TDS/TCS limits and compliance requirements.
Investors & Professionals will benefit from reduced tax rates on securitized trusts and professional fees.
Individuals remitting funds abroad for education will save on TCS, making overseas education more affordable.

4. Effective Date & Compliance Guidelines

These amendments take effect from April 1, 2025. Taxpayers should update their records, consult tax professionals, and ensure timely deductions and payments to avoid penalties.