Updated TDS Rates and Limits Effective from April 1, 2025: Major Adjustments and Consequences

The Government of India has revealed significant revisions to the Tax Deducted at Source (TDS) rates and thresholds that will come into effect on 1st April 2025. These modifications, introduced in the Union Budget 2025, aim to enhance tax compliance and offer relief to taxpayers. Below is a succinct summary of the updated TDS rates and limits.

1. TDS on Salary (Section 192)

• There are no modifications to the current provisions. Employers will continue to deduct TDS according to the relevant income tax slab rates.

2. TDS on Interest Income (Section 194A)

• The exemption threshold for TDS on interest income (including interest from banks and post offices) has been raised:
  • For senior citizens, the exemption limit has increased from ₹50,000 to ₹75,000 annually.
  • For other taxpayers, the limit has been raised from ₹40,000 to ₹50,000 annually.

3. TDS on Rent (Section 194I)

• The threshold limit for TDS on rent has been elevated:
  • For individuals and Hindu Undivided Families (HUFs), the limit has been increased from ₹2,40,000 to ₹3,00,000 annually.
  • The TDS rate remains at 10% for land/building and 2% for plant/machinery.

4. TDS on Professional and Technical Fees (Section 194J)

• The threshold for TDS on professional or technical services has gone up from ₹30,000 to ₹50,000 per financial year, while the TDS rate stays at 10%.

5. TDS on Property Purchases (Section 194-IA)

• The minimum property value for TDS applicability has been updated from ₹50 lakh to ₹75 lakh. The TDS rate remains at 1% of the property's value.

6. TDS on Cash Withdrawals (Section 194N)

• The limit for TDS on cash withdrawals from banks has been revised from ₹1 crore to ₹1.5 crore for taxpayers who have filed their Income Tax Returns (ITR) in the past three years. The TDS rate is set at 2% on amounts that exceed this limit.

7. TDS on E-commerce Transactions (Section 194-O)

• The TDS rate of 1% on e-commerce transactions remains the same, but the exemption limit for individual sellers has increased from ₹5 lakh to ₹7.5 lakh annually.

8. TDS on Cryptocurrency Transactions (Section 194S)

• The TDS rate of 1% on transactions involving cryptocurrencies and virtual digital assets remains unchanged, with the exemption limit for small investors rising from ₹50,000 to ₹1 lakh per financial year.

These updates have been introduced with several key goals in mind:

• To reduce the tax burden on small taxpayers and individuals.
• To bolster tax compliance through increased exemption limits in various sections.
• To encourage digital transactions while discouraging large cash withdrawals.
• To simplify the tax filing process for both businesses and individuals.

• Salaried Employees: No major impact, as TDS continues to adhere to the established tax slabs.
• Senior Citizens: The increased exemption on interest income offers additional advantages to retirees.
• Property Buyers: The higher exemption limit lowers upfront tax deductions for property acquisitions.
• Freelancers & Professionals: More earnings can remain untaxed due to the raised exemption limit under Section 194J.
• Cryptocurrency Investors: More favorable limits for small investors before TDS applies.

The adjustments to TDS rates and limits set to take effect on 1st April 2025 are aimed at simplifying tax compliance while enhancing revenue collection for the government. Taxpayers should stay updated and modify their financial planning to take full advantage of these updates.

For any inquiries regarding TDS compliance, return filings, or tax advisory services, don't hesitate to contact myITRonline—your dependable partner in tax solutions!

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