In the ever-evolving Indian tax landscape, Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) play crucial roles in streamlining revenue collection and ensuring tax compliance. Almost every business entity, and in many cases even individuals, are liable to deduct or collect tax at source under specified transactions.
With the Finance Act 2025, significant amendments have been introduced for the Financial Year 2025-26 (Assessment Year 2026-27), impacting thresholds, rates, and procedural requirements for TDS and TCS. These changes aim to simplify compliance, reduce litigation, and eliminate duplication in certain areas.
Below is the detailed summary of all key TDS and TCS changes effective from 1st April 2025:
Summary of TDS Threshold and Rate Changes (Effective FY 2025-26)
| Sl. | Section | Nature of Payment | TDS Rate | Existing Threshold | Amended Threshold |
| 1 | 193 | Interest on securities | 10% | Nil | ₹10,000 |
| 2 | 194 | Dividend for individual shareholder | 10% | ₹5,000 | ₹10,000 |
| 3 | 194B | Lottery, crossword puzzle winnings | 30% | Aggregate > ₹10,000/year | ₹10,000 per transaction |
| 4 | 194BB | Winnings from horse races | 30% | ₹10,000 | ₹10,000 per transaction |
| 5 | 194D | Insurance commission | 2% | ₹15,000 | ₹20,000 |
| 6 | 194G | Commission/prize on lottery tickets | 2% (from 01.10.2024) | ₹15,000 | ₹20,000 |
| 7 | 194H | Commission or brokerage | 2% (from 01.10.2024) | ₹15,000 | ₹20,000 |
| 8 | 194-I | Rent (land/building/plant/machinery) | 2% / 10% | ₹2,40,000/year | ₹50,000/month |
| 9 | 194J | Professional/technical services | 2% (FTS), 10% (others) | ₹30,000 | ₹50,000 |
| 10 | 194K | Income from Mutual Funds | 10% | ₹5,000 | ₹10,000 |
| 11 | 194LA | Compensation on compulsory acquisition | 10% | ₹2,50,000 | ₹5,00,000 |
| 12 | 194LBC | Income from securitization trust | 25%/30% | No change | Rate reduced to 10% for all |
🔹 Overhaul in Section 194A – Interest Other Than Securities
Section 194A deals with TDS on interest (other than interest on securities). The Finance Act 2025 has increased the threshold limits significantly, especially benefiting senior citizens.
| Payer | Existing Threshold | New Threshold | For Senior Citizens (Old) | For Senior Citizens (New) |
| Bank (Scheduled/Commercial) | ₹40,000 | ₹50,000 | ₹50,000 | ₹1,00,000 |
| Co-operative Bank | ₹40,000 | ₹50,000 | ₹50,000 | ₹1,00,000 |
| Post Office Schemes | ₹40,000 | ₹50,000 | ₹50,000 | ₹1,00,000 |
| Any Other Payer | ₹5,000 | ₹10,000 | ₹5,000 | ₹10,000 |
| Cooperative Society u/s 194A(3)(v)/(via) | ₹40,000 | ₹50,000 | ₹50,000 | ₹1,00,000 |
This amendment reduces compliance burdens and protects senior citizens from unnecessary TDS deductions on their fixed income.
TCS Rate Changes – Forest Products
| Sl. | Nature of Goods | Existing Rate | New Rate |
| 1 | Timber/Forest Produce (under forest lease) | 2.5% | 2% |
| 2 | Timber (not under forest lease) | 2.5% | 2% |
TCS on Sale of Goods Removed (Section 206C(1H))
Earlier, Section 206C(1H) required TCS at 0.1% on sale of goods exceeding ₹50 lakh in a financial year, applicable to sellers.
Simultaneously, Section 194Q imposed TDS at 0.1% on buyers for the same threshold.
To eliminate this dual compliance and confusion:
🔹Section 206C(1H) has been removed.
🔹 Only TDS under Section 194Q will now be applicable on such high-value goods transactions.
This simplifies compliance and avoids disputes about whether TDS or TCS applies.
Higher TDS/TCS for Non-filers Removed (Sections 206AB & 206CCA)
Earlier:
- Section 206AB imposed higher TDS rates for non-filers.
- Section 206CCA imposed higher TCS rates for non-filers.
These provisions created a compliance burden on deductors/collectors, requiring them to verify the return filing status of payees.
As per Finance Act 2025:
- Both Sections 206AB & 206CCA are omitted.
- Now, higher TDS/TCS applies only for non-availability of PAN.
- Return-filing status is no longer relevant for deductor/collector.
Prosecution Relaxation for TCS Delays (Section 276BB)
Previously, delayed remittance of TCS could attract prosecution under Section 276BB.
Now Amended:
No prosecution will be initiated if TCS is deposited before the due date for furnishing the quarterly TCS statement under Section 206C(3).
This provides relief to genuine taxpayers who may have delayed the deposit but still complied before return filing.