The government has introduced key TDS changes effective April 1, 2025, aimed at improving cash flow and reducing tax burdens for various income groups. These adjustments will impact interest income, dividends, rent, and commissions.
TDS Limit Increased for Senior Citizens
From April 1, 2025, the TDS threshold for senior citizens will be doubled. Senior citizens will only face TDS on interest income if the total exceeds Rs 1 lakh in a year. If their interest income stays below this threshold, the bank will not deduct TDS.
TDS Limit Raised for General Taxpayers
The government also raised the TDS threshold for general taxpayers. Starting April 2025, the TDS limit for interest income has been increased from Rs 40,000 to Rs 50,000. Tax will be deducted only if the interest exceeds the new limit.
TDS on Rent Payments: New Thresholds
TDS on rent payments will now be applicable if the monthly rent exceeds Rs 50,000. This threshold was previously set at Rs 2.4 lakh annually. The change takes effect from April 1, 2025. If tenants pay Rs 50,000 or more in rent per month, TDS will be deducted.
Section 194IB TDS for Rent Payments
Section 194IB applies to individuals or Hindu Undivided Families (HUFs) who pay rent exceeding Rs 50,000 per month. The TDS rate has been reduced from 5% to 2%, effective from October 1, 2024.
TDS on Rent under Section 194I
For companies, partnerships, and trusts making rent payments, TDS is applicable if annual rent exceeds Rs 6 lakh. The previous threshold was Rs 2.4 lakh annually. The revised limit applies from FY 2025-26. Rent on plant and machinery will have a TDS rate of 2%, and rent on buildings or furniture will have a TDS rate of 10%.
Increased TDS Limit on Dividends and Mutual Funds
From April 1, 2025, the TDS exemption limit for dividends and mutual funds will increase to Rs 10,000. The previous limit was Rs 5,000. This change will help investors retain more income from dividends and mutual funds.
TDS on Insurance and Brokerage Commissions
The TDS threshold on insurance commissions has been raised from Rs 15,000 to Rs 20,000, effective from April 1, 2025. This change will ease the burden for small insurance agents and brokers.
Conclusion: Improved Cash Flow and Tax Relief
The TDS reforms introduced in the Union Budget 2025 aim to reduce the tax burden on senior citizens, small investors, and professionals. These updates provide greater financial flexibility and simplify compliance for taxpayers. As these changes come into effect, individuals should ensure they meet the new requirements to take full advantage of the relief offered.
