Key TDS reforms to benefit taxpayers from April 1

March 13, 2025 Finance Talk Valli Sarvani

Tax Deducted at Source (TDS) is a mechanism where tax is deducted at the time of income payment, such as salary, interest, rent, or commission.

The payer deposits the deducted amount with the government, ensuring advance tax collection and preventing tax evasion.

The Union Budget 2025 has introduced several changes to the Tax Deducted at Source (TDS) system, offering financial relief to investors, senior citizens, and professionals.

These amendments, effective April 1, 2025, aim to reduce the tax burden and simplify compliance.

Here are the key TDS reforms:

Investors will benefit from an increase in the TDS exemption limit for dividends and mutual fund earnings. The government has doubled the threshold from ₹5,000 to ₹10,000, allowing investors to retain more of their returns.

To provide additional support to senior citizens, the government has raised the TDS exemption on interest income from ₹50,000 to ₹1 lakh per year. This means that banks will not deduct TDS on interest earned from fixed deposits (FDs) and recurring deposits (RDs) unless the total exceeds ₹1 lakh annually.

For individuals below 60 years, the exemption limit on interest income has increased from ₹40,000 to ₹50,000 per year. This update is particularly beneficial for those relying on FD interest as a primary income source.

The new TDS rule simplifies taxation on lottery winnings, crossword puzzles, and horse racing bets. Previously, TDS was applied if total winnings exceeded ₹10,000 in a year, even if received in multiple smaller amounts. Now, TDS will be deducted only if a single transaction crosses ₹10,000.

For instance, earlier, if someone won ₹5,000 thrice (total ₹15,000), TDS was deducted. Under the revised rule, no tax applies unless one-time winnings exceed ₹10,000.

To ease cash flow challenges for insurance agents and brokers, the government has increased the TDS exemption limit on commissions from ₹15,000 to ₹20,000. This change will enhance financial stability for professionals in the insurance and brokerage sectors.

These 2025 changes will offer significant financial relief and streamline tax compliance for individuals and businesses.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on March 05, 2017