Budget 2025: Proposes To Rationalise Tax Collected And Deducted At Source

This has come as the government's objective is to focus on personal income tax reforms, especially on the middle class. (Image source: Envato)

The government has proposed to rationalise taxation for the middle class by simplifying tax deducted at source and tax collected at source, Finance Minister Nirmala Sitharaman said while presenting the Union Budget for 2025-26 (April-March).

Sitharaman has proposed to change the limit for tax deduction for senior citizens to be increased to Rs 1 lakh from Rs 50,000. This amount for tax deduction will be increased for better clarity and uniformity.

The threshold to collect tax at source on remittances under the liberalised remittance scheme will be increased to Rs 10 lakh from Rs 7 lakh earlier.

The annual limit of Rs 2.4 lakh for TDS exemption on rent will be raised to Rs 6 lakh, she said.

This will reduce the number of transactions liable to TDS, thus benefitting small taxpayers receiving small payments.

"I also propose to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution," she said.

This has come as the government's objective is to focus on personal income tax reforms, especially on the middle class, the rationalisation of TDS and TCS for easing difficulties, reducing compliance burden, encouraging ease of doing business and employment and investment.

Both TDS and TCS are being applied to any transaction relating to the sale of goods.

"To prevent such compliance difficulties, I propose to omit the TCS. I also propose that the provisions of the higher TDS deduction will now apply only in non-PAN cases," she said.

In July 2024, the delay for payment of TDS up to the due date of the filing statement was decriminalised. Sitharaman has proposed to provide the same relaxation to TCS provisions as well.