Budget 2025: FM announces TDS, TCS reforms to ease compliance

Union Finance Minister Nirmala Sitharaman, presenting her eighth consecutive Union Budget 2025 today, announced a series of initiatives to rationalise Tax Deducted at Source (TDS) or TCS (Tax Collected at Source).

The FM says the limit for a tax deduction on interest for senior citizens is being doubled from the present Rs 50,000 to Rs 1 lakh. Similarly, the annual limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh. This will reduce the number of transactions liable to TDS, benefitting small taxpayers receiving small payments.

The threshold to collect tax at source (TCS) on remittances under RBI’s Liberalised Remittance Scheme (LRS) has also been increased from Rs 7 lakh to Rs 10 lakh. "I also propose to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution," the FM says.

She says both TDS and TCS are being applied on any transaction relating to the sale of goods, and now only TDS and not TCS will be levied in goods sale transactions. She says to prevent such compliance difficulties, the TCS will be omitted. "The provisions of the higher TDS deduction will now apply only in non-PAN cases. In July 2024, the delay for payment of TDS up to the due date of filing the statement was decriminalised. I propose to provide the same relaxation to TCS provisions as well."