The Union Budget 2025 has introduced major changes to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) to make tax filing easier, improve cash flow, and reduce the financial burden on taxpayers. These updates will benefit senior citizens, landlords, freelancers, and those sending money abroad for education or travel. Let’s break it down in simple terms.
What is TDS (Tax Deducted at Source)?
TDS is a tax collection method introduced by the Income Tax Department of India, requiring tax to be deducted at the point of income generation. In simple terms, before a payer (such as an employer or landlord) makes a payment—whether for salary, rent, or interest—a certain percentage of tax is deducted and sent directly to the government on behalf of the payee.
TDS is governed by the Income Tax Act 1961 and applies to various financial transactions. It ensures that tax is paid throughout the year, helping avoid a lump sum liability at the end of the financial year.
Also Read: Tax-Free Up to ₹12.75 Lakh –What Happens If You Exceed the Limit?
What is TCS (Tax Collected at Source)?
TCS is a tax process where the seller collects tax from the buyer at the time of making payment for certain goods or services. The collected tax is then deposited with the government. TCS applies to specific transactions under the Income Tax Act, such as the sale of goods or services.
Unlike TDS, where the payer deducts the tax, TCS is collected by the seller. It is also applicable in cases of certain remittances, like sending money abroad or purchasing foreign tour packages.
|
Transaction |
Current Threshold |
Proposed Threshold |
|
Rent |
2.4 Lakhs |
6 Lakhs |
|
Interest other than interest on securities |
i) ₹50,000 (senior citizen) ii) ₹40,000 (others when the payer is a bank, cooperative society, post office) iii)) ₹5,000 (other cases) |
₹1 lakh (senior citizen) ₹50,000 (others when payer is bank, cooperative society, post office) ₹10,000 (other cases) |
|
Interest on Securities |
₹10,000 |
|
|
Remittance under LRS for education financed through a loan |
0.5% over ₹7 lakh |
|
|
Remittance under LRS and overseas tour program package |
₹7 Lakh |
₹10 Lakh |
|
Dividend for individual shareholder |
₹5000 |
₹10,000 |
|
Income from mutual fund units of specified company/undertaking |
₹5000 |
₹10,000 |
|
Winning prizes from lottery, crossword puzzle, horse race |
Over ₹10,000 for combined income in a financial year |
₹10,000 for a single transaction |
|
Fee for professional/technical services |
₹30,000 |
₹50,000 |
|
Income by way of enhanced compensation |
₹2.5 lakh |
₹5 lakh |
How do These Changes Benefit Taxpayers?
More Money in the Hands of Senior Citizens
Before: TDS was deducted if senior citizens earned more than ₹50,000 in interest income.
Now: This limit has doubled to ₹1 lakh, helping retirees manage their savings better.
Landlords Can Keep More of Their Rent
Before: If you earned more than ₹2.4 lakh per year from rent, TDS was deducted.
Now: The limit is increased to ₹6 lakh, meaning many landlords won't face tax deductions on rental income.
Studying & Traveling Abroad Just Got Easier
Before: Sending more than ₹7 lakh abroad attracted a TCS deduction.
Now: This limit has been increased to ₹10 lakh, reducing the immediate tax burden for education and travel.
Additionally, if you are taking a loan for education, no TCS will be deducted.
More Tax Relief for Freelancers & Gig Workers
Before: If a freelancer or consultant earned more than ₹30,000 from a single client, TDS was deducted.
Now: The limit is increased to ₹50,000, which means fewer tax deductions for independent professionals.
Also Read: Union Budget 2025 Highlights
To Sum Up
These changes in TDS and TCS make life easier for taxpayers. Whether you're a senior citizen, landlord, freelancer, or planning to send money abroad, the new rules offer better cash flow, fewer tax deductions, and easier financial management. Stay informed, plan your finances smartly, and take full advantage of these updates!
