From 1st April 2025, several critical changes in TDS and TCS provisions under the Income Tax Act have come into effect. These amendments, introduced through the Finance Act, 2025, aim to reduce compliance burden, clarify overlapping provisions, and widen the tax base. Whether you’re a deductor, collector, or a taxpayer, it’s essential to implement these updates before depositing your TDS and TCS for April 2025 to avoid penalties and mismatches in reporting.
TDS Changes from 1 April 2025
| S. No | Section | Description | Threshold upto 31st March 2025 | Threshold from 1st April 2025 | TDS Rate |
|---|---|---|---|---|---|
| 1 | 193 | Interest on securities | Nil | ₹10,000 | 10% |
| 2 | 194A | Interest other than securities | (i) ₹50,000 (Sr. citizens) | (i) ₹1,00,000 (Sr. citizens) | 10% |
| (ii) ₹40,000 (others) | (ii) ₹50,000 (others) | ||||
| (iii) ₹5,000 (others – non-banks) | (iii) ₹10,000 (others – non-banks) | ||||
| 3 | 194 | Dividend to individual shareholder | ₹5,000 | ₹10,000 | 10% |
| 4 | 194K | Income from units of MF or specified co./undertaking | ₹5,000 | ₹10,000 | 10% |
| 5 | 194B | Lottery, crossword puzzle, etc. winnings | Aggregate > ₹10,000/year | ₹10,000 per transaction | 30% |
| 6 | 194BB | Winnings from horse races | Aggregate > ₹10,000/year | ₹10,000 per transaction | 30% |
| 7 | 194D | Insurance commission | ₹15,000 | ₹20,000 | 5% |
| 8 | 194G | Commission/prize on lottery tickets | ₹15,000 | ₹20,000 | 2% |
| 9 | 194H | Commission or brokerage | ₹15,000 | ₹20,000 | 2% |
| 10 | 194-I | Rent | ₹2,40,000/year | ₹50,000/month or part thereof | 10% (land/building), 2% (plant/machinery) |
| 11 | 194J | Professional/technical service fees | ₹30,000 | ₹50,000 | 10% (prof.), 2% (tech./royalty) |
| 12 | 194LA | Enhanced compensation on compulsory land acquisition | ₹2,50,000 | ₹5,00,000 | 10% |
TCS Changes from 1 April 2025
TCS Rate on Forest Produce
| S. No | Nature of Goods | Percentage |
|---|---|---|
| (iii) | Timber or any other forest produce (not being tendu leaves) obtained under a forest lease | 2% |
| (iv) | Timber obtained by any mode other than under a forest lease | 2% |
| s | Section | Rates till 31st March 2025 | Rates from 1st April 2025 |
|---|
| Section 194LBC – Income from investment in securitization trust | 25% (Individual/HUF), 20% (Others) | 10% |
| Section 206C(1G) – TCS on LRS remittance for education (via loan) | 0.5% above ₹7 lakh | Nil |
TCS on Sale of Goods Removed from April 1, 2025
- Both Section 206C(1H) (TCS by seller) and Section 194Q (TDS by buyer) apply to the same transaction (goods worth over ₹50 lakh), causing duplicate compliance.
- Sellers face difficulty verifying whether buyers have deducted TDS, leading to both TDS and TCS being applied.
- To reduce compliance burden, Section 206C(1H) will be omitted from April 1, 2025.
- Only TDS under Section 194Q will apply—TCS by sellers will no longer be required on such transactions.
Removal of Higher TDS/TCS for Non-Filers (Sections 206AB & 206CCA)
- Current Law:
- Section 206AB: Higher TDS for persons not filing income tax returns.
- Section 206CCA: Higher TCS for such non-filers.
- Issue: Deductors/collectors find it difficult to verify ITR filing status, causing:
- Unnecessary deduction/collection at higher rates,
- Blocking of working capital,
- Increased compliance burden.
- Change from 1 April 2025: Both Sections 206AB and 206CCA will be omitted.
Expansion of TCS on Luxury Goods (Section 206C(1F)) – Effective from 22 April 2025
- Previous Rule: TCS was applicable only on sale of motor vehicles exceeding ₹10 lakh.
- Amended Rule: Now, TCS will also apply to notified luxury goods exceeding ₹10 lakh in value (per item), as notified by the Central Government.
- List of Notified Luxury Goods:
- Wrist watches
- Art pieces (antiques, paintings, sculptures)
- Collectibles (coins, stamps)
- Yachts, boats, canoes, helicopters
- Sunglasses
- Bags (handbags, purses)
- Shoes
- Sportswear & equipment (e.g., golf kits, ski-wear)
- Home theatre systems
- Horses used for racing or polo
- Applicability: TCS will apply on sale of any single item of the above goods if its value exceeds ₹10 lakh.
- Effective Date: 22 April 2025 (date of CBDT Notification No. 36/2025).
These changes mark a significant shift in tax compliance and reporting. It is crucial for businesses, finance professionals, and tax deductors/collectors to update their systems, processes, and forms in line with the revised provisions. Before depositing TDS/TCS for April 2025, cross-check the applicable rates, thresholds, and exemptions to ensure full compliance. Staying updated today will save you notices and penalties tomorrow.
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