5 Major Changes in TDS and TCS Rules from April 1: Know the Details

The Union Budget 2025 has introduced several important amendments to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) regulations, effective from April 1, 2025. These changes are designed to reduce unnecessary complexities in tax deduction and collection, offering relief to common taxpayers, traders, and businesses.

The modifications primarily focus on raising deduction limits, easing foreign remittances, removing specific compliance burdens, and improving overall cash flow. Here are the 5 key changes you should be aware of.

1. Revised Limits for TDS Deduction

TDS is deducted when earning interest from banks, paying rent, or making large payments. The latest budget proposes to rationalise these limits to ensure cash flow remains smooth and unnecessary tax deductions are minimised.

This change will particularly benefit individuals who frequently face TDS deductions on smaller transactions, as the revised limits will help reduce compliance burdens.

2. Higher Threshold for Sending Money Abroad Without TCS

If you send money overseas for purposes such as education, family support, or travel, there is now a relief.

• Previously, TCS was applicable on remittances exceeding ₹7 lakh.
• This threshold has now been increased to ₹10 lakh, allowing individuals to send more money abroad without incurring additional tax burdens.
• Additionally, if the funds are being sent through an education loan, no TCS will be levied, providing further relief to students and parents managing overseas education expenses.

3. TCS Exemption for Traders on Sales Above ₹50 Lakh

For businesses engaged in large-scale sales, a significant change has been introduced:

• Until now, traders had to deduct 0.1% TCS on sales exceeding ₹50 lakh.
• This requirement has now been completely abolished, effective 1st April 2025.
• This move aims to enhance cash flow for businesses and ease tax compliance.

For traders dealing with high transaction volumes, this change will reduce financial burdens and improve operational efficiency.

4. No Higher TDS/TCS for Non-Filers of ITR

Previously, individuals who did not file their Income Tax Returns (ITR) were subject to higher TDS and TCS rates.

• The Budget 2025 proposes to remove this provision, ensuring that those who miss filing returns will not be penalised with excessive deductions.
• This will be particularly beneficial for small businesses and individuals who face cash flow issues but are otherwise compliant taxpayers.

This change simplifies tax compliance and removes unnecessary financial strain on those with genuine reasons for delayed filings.

5. No Criminal Charges for Delay in Depositing TCS

Under the previous tax regime, failure to deposit collected TCS on time could result in legal consequences, including imprisonment for up to seven years.

• Budget 2025 modifies this rule, ensuring that if the pending TCS is deposited within the stipulated time, no criminal action will be taken.
• This amendment removes the fear of harsh legal consequences for businesses dealing with cash flow issues.

By eliminating extreme penalties, this reform ensures that businesses have adequate time to comply without undue pressure.

Conclusion

The Budget 2025 brings substantial relief to common taxpayers, traders, and businesses by simplifying tax compliance and reducing financial burdens. Overall, these changes streamline taxation, enhance ease of doing business, and reduce compliance stress for taxpayers across various sectors.

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