The Union Budget for 2025-26 introduces significant changes to tax deduction and collection processes, aiming to simplify compliance and enhance administrative efficiency. These amendments focus on revising thresholds, eliminating redundant provisions, and improving tax administration for both individuals and businesses.
1. Rationalization of TDS Thresholds
The government has proposed adjustments to TDS threshold limits across various sections to ease the burden on taxpayers and streamline compliance.
| Category | TDS/TCS Section | Previous Rate/Limit | New Rate/Limit |
|---|---|---|---|
| Interest on Securities | 193 | Nil | Rs. 10,000 |
| Interest Income (Senior Citizens) | 194A | Rs. 50,000 | Rs. 1,00,000 |
| Interest Income (Others) | 194A | Rs. 40,000 (banks) | Rs. 50,000 (banks) |
| Interest Income (Other Cases) | 194A | Rs. 5,000 | Rs. 10,000 |
| Dividend for Individuals | 194 | Rs. 5,000 | Rs. 10,000 |
| Mutual Fund Income | 194K | Rs. 5,000 | Rs. 10,000 |
| Lottery Winnings | 194B | Aggregate > Rs. 10,000 | Rs. 10,000 per transaction |
| Winnings from Horse Races | 194BB | Rs. 10,000 | Rs. 10,000 |
| Insurance Commission | 194D | Rs. 15,000 | Rs. 20,000 |
| Lottery Ticket Commission | 194G | Rs. 15,000 | Rs. 20,000 |
| Brokerage & Commission | 194H | Rs. 15,000 | Rs. 20,000 |
| Rent Payments | 194I | Rs. 2.4 lakh/year | Rs. 50,000 per month |
| Professional/Technical Fees | 194J | Rs. 30,000 | Rs. 50,000 |
| Enhanced Compensation Income | 194LA | Rs. 2,50,000 | Rs. 5,00,000 |
| TCS on Foreign Remittances | 206C(1G) | Rs. 7 lakh | Rs. 10 lakh |
| TCS on Education Remittances | 206C(1G) | 5% | Removed |
| Higher TDS for Non-PAN Cases | Various | Applied broadly | Only for Non-PAN holders |
| TCS Payment Delays | 206C | Strict penalties | Relaxed rules |
| TCS on Sale of Goods | 206C | Applied in some cases | Removed |
Benefit: The revised limits will reduce the number of individuals and businesses subject to TDS deductions, improving liquidity and easing compliance burdens.
2. Removal of TCS on Goods Sales
- Section 206C(1H): Previously, both TDS under Section 194Q and TCS under Section 206C(1H) applied to certain transactions.
- The Budget eliminates TCS on the sale of goods, preventing double taxation.
3. Adjusted TCS Provisions
The Budget 2025-26 introduces significant changes to TCS rules, particularly for foreign remittances under the Liberalized Remittance Scheme (LRS).
- LRS (Section 206C(1G)):
- Previous Limit: Rs. 7,00,000
- New Limit: Rs. 10,00,000
- Benefit: Fewer taxpayers will be subject to TCS on foreign remittances.
- TCS on Education Remittances (Section 206C(1G)):
- Major Relief: TCS has been completely removed for education-related remittances funded by loans from recognized financial institutions.
4. Removal of Higher TDS/TCS Rates for Non-Filers
- Section 206AB & 206CCA:
- Previously, non-filers of income tax returns were subject to higher TDS and TCS rates.
- The Budget has removed these higher rates, ensuring a fairer taxation approach.
- Benefit: Reduces compliance burdens and simplifies tax payments.
5. Compliance Simplifications & Decriminalization
The Budget introduces measures to ease compliance for taxpayers:
- TDS Delays: As of July 2024, delays in TDS payments up to the due date of filing returns have been decriminalized.
- TCS Delays: The same relaxation has been extended to TCS provisions.
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