Budget 2025: Experts' Weigh In On Increased TCS, TDS Limits

In line with the government's efforts to simplify tax laws, Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025 on Saturday, announced fresh reforms towards provisions of tax deducted at source and tax collected at source. There have been a few changes made around both in this budget.

The TCS on remittances under the liberalised remittance scheme have been proposed to increase from Rs 7 lakh to Rs 10 lakh. The limit for tax deduction for senior citizens will be doubled to Rs 1 lakh. The TCS on remittances on education will be removed where such loan is taken from financial banks. The annual limit of Rs 2.4 lakh for the TDS on rent is raised to Rs 6 lakh.

Delay for payment of the TCS up to the due date to be decriminalised. TCS on remittances if loan is taken for education waived, she says.

For the interest on FDs, the TDS limit hiked to 1 lakh from current 50,000 for senior citizens and for others, hiked to 50,000 from 40,000. On the dividend on shares and MFs, the TDS limit hiked to 10,000 per company or the AMC from 5,000.

The TDS limit on rent hiked from 24,000 per month to Rs 50,000. This could extrapolate to 6 lakh per annum. And the interest on securities like bonds, the TDS threshold has been hiked to 10,000 from nil.

"Happy with another provision introduced, which exempts the NSS depositors, who had to withdraw their deposits (made before April 1992) because of the non-accrual of interest on the same from 1.10.2024, from having to pay tax on this withdrawal now," said Arvind Rao, founder of Arvind Rao and Associates.

The Modi government in the last budget had introduced a number of measures aiming to streamline the TDS with a significant proposal being the merger of the two tax exemption regimes for charities into a single framework.

Besides, it proposed to cut the TDS rate for several payments from 5% to 2% and eliminated the 20% rate of the TDS applicable on the repurchase of mutual funds and UTI units. The TDS rate for e-commerce operators was cut to 0.1% from 1%. The proposal in the last budget also sought to allow a credit of the TCS against the TDS deducted on salaries.

"The employer did not have the power to adjust the TCS against the TDS," said Samir Kanabar, tax partner at EY India. The amendment in Budget 2024 had allowed the employee to declare their TCS to the employer, who could then adjust tax accordingly.

"Refunds that took a year or so to happen will happen in real-time as the employer can adjust for it," said Kanabar. This essentially translates to more in-hand salary of the individual as the claim for their TCS refund need not be done separately.