Recent Changes In TDS Provisions- Latest Update

The Budget 2025 has introduced enhanced threshold limits for TDS, ensuring that smaller transactions remain exempt from tax deduction, thereby reducing the compliance burden. These revised limits, effective from April 1, 2025, apply to various sections of the Income Tax Act, 1961.

Here’s a summary of the updated TDS threshold limits:

TDS threshold rationalization— TDS provisions have various thresholds of amount of payment or amount of income, beyond which tax is required be deducted. The amended thresholds are as below—

Section 193 -Interest on securities— Section 193 of the Act requires that any person responsible for paying to a resident any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier being the amount or the aggregate of amounts exceeding ten thousand rupees during the financial year, deduct income-tax at the rates in force on the amount of the interest payable.

Previously, there was no threshold for amount of income by way of interest for deduction of tax at source in this section.

Proviso to the section provides for non-deduction of tax at source in certain cases.

Clause (v) of the proviso states that no tax is required to be deducted on any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if the amount of interest or, as the case may be, the aggregate amount of such interest, paid or likely to be paid, through an account payee cheque, on such debenture during the financial year by the company does not exceed Rs. 5,000/-.

The threshold limit has been increased from Rs.5,000 to  10,000/- w.e.f. 01.04.2025.

Section 194— Dividends

Section 194D of the Act requires that the principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment by any mode in respect of any dividend or before making any distribution or payment to a shareholder, who is resident in India, of any dividend within the meaning of all sub-clauses of clause (22) of section 2, deduct from the amount of such dividend, income-tax at the rate of 10%.

The first proviso to this section states that no tax is required to be deducted when the amount or aggregate of amounts of such dividend, distributed or paid or likely to be distributed or paid, during the financial year by the company to the shareholder, being an individual, does not exceed Rs. 5,000/-.

The threshold limit has been increased from Rs. 5,000 to 10,000/- w.e.f. 01.04.2025.

Section 194A -Interest other than interest on securities

Sub-section (1) of section 194A of the Act requires that any person, not being an individual or a Hindu undivided family, responsible for paying to a resident any interest income other than interest income on securities, shall deduct income-tax thereon at the rates in force.

Threshold for requirement to deduct tax at source in Section 194A are stated below —

Section 194B - Winnings from lottery or crossword puzzle

Section 194B of the Act requires that any person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, being the amount or the aggregate of amounts exceeding Rs. 10,000/- during the financial year shall, at the time of payment thereof, deduct income-tax thereon at the rates in force

The condition of threshold applying on aggregate of amounts exceeding Rs. 10,000/- has been removed and now this threshold applies in respect of a single transaction.

Section 194BB - Winnings from horse race

Section 194BB of the Act requires that any person, being a bookmaker or a person to whom a license has been granted by the Government under any law for the time being in force for horse racing in any race course or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from any horse race , being the amount or aggregate of amounts exceeding Rs. 10,000/- during the financial year, shall, at the time of payment thereof, deduct income-tax thereon at the rates in force.

The condition of threshold applying on aggregate of amounts exceeding Rs. 10,000/- has been removed and now this threshold applies in respect of a single transaction.

Section 194D -Insurance commission

Section 194D of the Act requires that any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall, deduct income-tax thereon at the rates in force, provided that the amount of such payment exceeds Rs. 15,000/- in a financial year.

The threshold limit has been increased from Rs. 15,000 to 20,000/- w.e.f. 01.04.2025.

Section 194G - Commission, etc., on sale of lottery tickets.

Section 194G of the Act requires that any person who is responsible for paying, to any person, who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called) on such tickets in an amount exceeding Rs. 15,000/- shall, deduct income-tax thereon at the rate of two per cent.

The threshold limit has been increased from Rs. 15,000 to 20,000/- w.e.f. 01.04.2025.

Section 194H - Commission or brokerage.

Section 194H of the Act requires that any person, not being an individual or a Hindu undivided family, who is responsible for paying, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, deduct income-tax thereon at the rate of two per cent, if the amount paid during a financial year exceeds Rs. 15,000/-.

The threshold limit has been increased from Rs. 15,000 to 20,000/- w.e.f. 01.04.2025.

Section 194-I -Rent

Section 194-I of the Act requires that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall deduct income-tax at the rates as specified therein, only when the amount of such rental income exceeds Rs. 2,40,000/- in a financial year.

This threshold amount of income by way of rent for requirement of deduction of tax at source has been increased from Rs. 2,40,000/- in a financial year to Rs. 50,000/- in a month or part of a month.

Section 194J - Fees for professional or technical services.

Section 194J of the Act requires for deduction of tax at source on payment by any person, not being an individual or a Hindu undivided family, who pays to a resident any sum of the nature of fees for professional or technical services, any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or royalty, or any sum referred to in clause (va) of section 28 of the Act, at the rates specified therein.

Clause (B) of proviso to sub-section (1) of section 194J provides the threshold amount of sum paid during the financial year for tax to be deducted under this section.

The thresholds specified in Clause (B) of proviso to sub-section (1) of section 194J has been increased from Rs. 30,000/- to 50,000/-.

Section 194K -Income in respect of units

Section 194K of the Act requires that for any person responsible for paying to a resident any income in respect of units of a Mutual Fund specified under clause (23D) of section 10; or units from the Administrator of the specified undertaking; or units from the specified company, shall, deduct income-tax at the rate of ten per cent, provided the amount of such income to income to a payee exceeds Rs. 5,000/- in a year.

This threshold amount has been increased from Rs. 5,000/- to Rs. 10,000/- for requirement of deduction of tax at source under this section.

Section 194LA - Payment of compensation on acquisition of certain immovable property.

Section 194LA of the Act requires that any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, deduct an amount equal to ten per cent of such sum as income-tax thereon, provided that such amount exceeds Rs. 2,50,000/- in a financial year.

The threshold limit has been increased from Rs. 2,50,000/- to Rs. 5,00,000/- for requirement of deduction of tax at source under this section.

TDS rate reduction for section 194LBC

Section 194LBC of the Act requires that where any income is payable by a securitisation trust to an investor, being a resident, in respect of an investment in a securitisation trust as specified therein, the person responsible for making the payment shall, deduct income-tax, at the rate of 25%, if the payee is an individual or a Hindu undivided family and 30%, if the payee is any other person.

TDS rate under section 194LBC of the Act has been reduced from 25% and 30% to 10% w.e.f. 01.04.2025 as this sector is sufficiently organized and regulated.