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Major TDS and TCS Changes for FY 2025-26: Everything You Need to Know
- Sumit ved
- Aug 10, 2025
- 2 min read
With the Finance Act 2025, the Government has made key amendments to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions. These changes, effective from April 1, 2025, aim to simplify compliance, ease taxpayer burden, and align thresholds with current economic realities.
Here is a concise breakdown of the updates:
Insurance and Brokerage Commissions
New TDS threshold: Rs 20,000 per year (earlier Rs 15,000)
Impact: TDS will apply only when cumulative commission exceeds Rs 20,000 in a financial year.
Dividend and Mutual Fund Income
Revised threshold: Rs 10,000 (earlier Rs 5,000)
Benefit: Investors will enjoy higher exemption before TDS applies.
Rental Income
New limits: TDS applies if rent exceeds Rs 6 lakh per year or Rs 50,000 per month
Earlier limit: Rs 2.4 lakh annually
Implication: Fewer tenants will fall under the TDS net.
Reduced TDS Rate under Section 194LBC
New rate: 10% for all
Earlier rates: 25% (Individuals/HUFs) and 30% (Others)
Purpose: Rationalization of TDS on income from securitization trusts.
Omission of Sections 206AB and 206CCA
These sections imposed higher TDS/TCS rates for specified non-filers.
Change: They are now removed, reducing compliance and tracking burdens.
New Section 194T: TDS on Partner Payments
TDS rate: 10%
Applies to: Remuneration, interest, salary, bonus, or commission to partners
Threshold: Rs 20,000 per year
Significance: Brings clarity to taxation of firm-partner transactions.
Professional Fees (Section 194J)
New threshold: Rs 50,000 per year (earlier Rs 30,000)
Effect: Small professionals get more room before TDS applies.
Compensation on Compulsory Acquisition (Section 194LA)
Revised threshold: Rs 5 lakh per year (earlier Rs 2.5 lakh)
Applicable to: Compensation on acquisition of immovable property.
TDS on Interest Income
Senior citizens: Threshold increased to Rs 1 lakh per year (earlier Rs 50,000)
Others: Threshold increased to Rs 50,000 per year (earlier Rs 40,000)
Advantage: Reduced TDS for fixed deposit and savings interest earners.
TCS on Foreign Remittances (LRS) – Section 206C(1G)
Threshold hiked: Rs 10 lakh per year (earlier Rs 7 lakh)
Context: Applies to outward remittances under the Liberalised Remittance Scheme.
TCS on Sale of Specified Goods Removed
Section 206C(1H) omitted
Now applicable: Only TDS under Section 194Q will apply
Result: Reduced duplication and simplified seller-buyer compliance.
Conclusion
These amendments are aimed at streamlining tax deduction and collection, reducing unnecessary withholding, and encouraging higher compliance through better thresholds and clearer rules.
Tip for taxpayers and professionals: Review your transactions and vendor or customer relationships for FY 2025-26 to ensure timely adjustments to TDS/TCS compliance under the new provisions.
Short Summary
The Finance Act 2025 raises TDS and TCS thresholds across multiple areas including commissions, dividends, rent, interest, and professional fees, while removing some sections to reduce compliance burdens. Key highlights include higher exemption limits, lower rates in certain cases, and elimination of duplicate provisions — effective from April 1, 2025.
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