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Published on 4 June 2025

TDS & TCS Changes for FY 2025–26: New Thresholds & Rules Explained

If you’ve ever found yourself tangled in the web of India’s tax rules, you know how confusing TDS (Tax Deducted at Source) can get. But with the Union Budget 2025 shaking things up, there’s actually some good news for anyone who deals with TDS or TCS (Tax Collected at Source). Let’s walk through what’s changed, what you need to watch out for, and how you can stay on the right side of compliance—without losing your mind.

What Exactly is TDS?

Think of TDS as a way for the government to make sure it gets its share of taxes right when income is generated. So, if you’re paying someone—be it salary, rent, interest, or even professional fees—you’re supposed to deduct tax before handing over the money. The idea is simple: collect tax upfront and keep things transparent, so there’s less room for evasion.

What’s New in TDS for FY 2025-26?

This year, the government has made some welcome tweaks to the TDS rules. Here’s what stands out:

  • Interest on securities: If you’re earning interest, TDS now kicks in only if it crosses ₹10,000.
  • Dividend income: Same story here—₹10,000 is your new threshold.
  • Interest from banks, co-ops, or post offices: For most, the limit is ₹50,000, but for others, it’s ₹10,000. Senior citizens get a sweet deal with a threshold of ₹1,00,000.
  • Professional or technical fees: TDS applies only if you’re paying more than ₹50,000.
  • Commission or brokerage: The bar is now set at ₹20,000.
  • Rent: Unless you’re paying more than ₹50,000 a month, you’re in the clear.
  • Lottery or horse race winnings: Only winnings above ₹10,000 per transaction will see TDS.

And there are a few sections you’ll want to remember:

  • Section 194IB: If you’re an individual or HUF paying rent above ₹50,000 per month, you’ll need to deduct TDS at a flat 2%.
  • Section 1947: Partner remuneration above ₹20,000 per partner per year? That’s now subject to 10% TDS.
  • Section 194K: If your mutual fund income crosses ₹10,000, TDS applies.

For those into gaming, the rules are clearer now: TDS is deducted on each winning above ₹10,000—not on the total winnings.

TCS: What’s Changed for FY 2025-26?

TCS rules have also seen a shake-up:

  • Section 206C(1H): The TCS on the sale of goods above ₹50 lakh is gone. Sellers, breathe easy!
  • Section 206C(1G): If you’re remitting money abroad under LRS or booking an overseas tour, the threshold is now ₹10 lakh. Plus, if you’re remitting for education via a loan, no TCS will be collected.
  • Section 206CCA: No more checking if someone filed their ITR for higher TCS rates. That’s one less headache.

TDS on Salaries: What’s the Latest?

The CBDT’s latest circular (No. 3/2025) has brought a few changes:

  • The forms and rules around perquisites are updated, so make sure you’re using the latest ones.
  • The definition of salary now includes contributions to the Agniveer Corpus Fund.
  • Under the new tax regime, if your income is up to ₹7 lakh, you get a full rebate under Section 87A—meaning, no tax!

TDS vs. TCS: How Are They Different?

Let’s clear this up. TDS is all about deducting tax when you make payments like salary, rent, or interest. The payer (that’s you) deducts the tax before paying. TCS, on the other hand, is collected by the seller at the time of selling certain goods—think timber, scrap, or even cars. Both have their own filing requirements and thresholds, but the main difference is who collects the tax and when.

Staying Compliant: Your Checklist

  • Always deposit TDS or TCS by the 7th of the next month.
  • Don’t forget to issue certificates within 15 days after filing your returns.
  • File those quarterly returns on time—penalties are no fun.
  • Keep your records straight and make sure your vendor master data reflects the new thresholds.

Frequently Asked Questions

  • Q - What if I don’t give my PAN or Aadhaar?

  • A - TDS will be deducted at the higher of the prescribed rate or a whopping 20%. So, always provide your details.

  • Q -Is TDS deducted on every payment?

  • A - Nope. TDS only applies when the payment crosses the threshold set for that category.

  • Q - Can both TDS and TCS apply to the same transaction?

  • A - If TDS is deducted, TCS isn’t collected. TDS always takes precedence.

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