Tax Deducted at Source, commonly known as TDS, is a key part of the income tax TDS India system. It means tax is collected directly from the source of your income. Staying informed about TDS rules is essential, as the government introduces TDS updates and TDS changes periodically. Significant new TDS rules came into effect on April 1, 2025, impacting the financial year 2025-26 (Assessment Year 2026-27). These updates involve revised TDS threshold limits for various payments, the introduction of new sections like 194T for partnerships, and simplified compliance procedures. This guide explains what’s new for TDS FY 2025-26.
Major TDS Amendments Effective April 1, 2025 (FY 2025-26)
Significant TDS changes took effect from April 1, 2025, impacting TDS rules and TDS threshold limits across various sections. Here’s a detailed breakdown:-
| TDS Section | Nature of Payment / Rule Change | Old Rule / Threshold (Before Apr 1, 2025) | New Rule / Threshold / Rate (From Apr 1, 2025) | Brief Explanation / Impact |
| 194T (New) | Payments to Partners (Salary, Interest, Bonus, etc.) | No TDS was applicable | 10% TDS if aggregate payment exceeds ₹20,000 per partner per financial year. | Introduces new TDS rules for partnership firms/LLPs, increasing TDS compliance. See our detailed guide: New Section 194T Rules on Payments to Partners. |
| 194A | Interest (Other than Securities) | Bank/PO/Co-op: ₹40k (General), ₹50k (Seniors). Other: ₹5k. | Bank/PO/Co-op: ₹50,000 (General), ₹1,00,000 (Seniors). Other: ₹10,000. | Significant relief, especially for TDS for senior citizens, reducing income tax TDS India burden on interest income. |
| 194I | Rent | ₹2.4 Lakh per financial year. | ₹50,000 per month or part of the month. (Rate: 2% Machinery, 10% Property/Furniture) | Changes the basis from annual to monthly, potentially impacting more rental transactions. |
| 194J | Professional / Technical Fees | ₹30,000 per financial year (for each category - Prof. & Tech.). | ₹50,000 per financial year (for each category). (Rate: 2% Tech/Royalty-Movies, 10% Professional). | Higher TDS threshold provides relief for smaller payments to professionals/technical service providers. |
| 194H | Commission / Brokerage | ₹15,000 per financial year | ₹20,000 per financial year. (Rate remains 2% after Oct 2024 change). | Increased limit reduces TDS compliance for smaller commission payments. |
| 194D | Insurance Commission | ₹15,000 per financial year. | ₹20,000 per financial year. (Rate remains 5% for Ind/HUF, 10% Co. after Oct 2024 change likely adjusted for Ind/HUF too - check specific rates). | Increased TDS limit benefits insurance agents with lower commission earnings |
| 194G | Commission on Lottery Tickets | ₹15,000 per financial year. | ₹20,000 per financial year. (Rate remains 2% after Oct 2024 change). | Higher exemption limit for lottery agents. |
| 194K | Income from Mutual Fund / UTI Units | ₹5,000 per financial year. | ₹10,000 per financial year. (Rate remains 10%). | Benefits small investors receiving dividends or income from units. |
| 194LA | Compensation on Immovable Property Acquisition | ₹2.5 Lakh per financial year. | ₹5,00,000 per financial year. (Rate remains 10%). | Higher threshold provides relief on smaller compensation amounts. |
| 194B/BB | Winnings from Lottery / Horse Race | ₹10,000 aggregate per financial year. | ₹10,000 per single transaction. (Rate remains 30%). | Simplifies rule; TDS applies only on individual wins exceeding the limit, not cumulative small wins. |
| 194LBC | Income from Securitisation Trust | 25% (Ind/HUF), 30% (Others). | Standardised 10% for all resident investors. | Significant rate reduction likely encourages investment in securitisation trusts. |
| 206AB / 206CCA | Higher TDS/TCS for Non-Filers of ITR | Higher of (2x Rate specified, 2x Rate in force, 5%). | Sections Omitted. | Major simplification for deductors/collectors; no need to check ITR filing status for higher rates. Reduces risk of related TDS penalties. |
Key Changes in TCS Rules – Effective April 1, 2025
Alongside the TDS changes, several adjustments were also made to Tax Collected at Source (TCS) rules, effective from April 1, 2025. Understanding the difference between TDS vs TCS is important, but here’s a quick look at the main TCS changes 2025 India:
- Higher LRS Threshold: The threshold for collecting TCS on foreign remittances under the Liberalized Remittance Scheme (LRS) for purposes like overseas tours or investments increased from ₹7 Lakh to ₹10 Lakh per financial year.
- Education Loan Exemption: TCS is no longer applicable on LRS remittances for education if the amount is financed through an educational loan from specified institutions.
- TCS on Sale of Goods Removed: Section 206C(1H), which required TCS collection on the sale of goods exceeding ₹50 Lakh, has been omitted. This removes overlap with TDS Section 194Q and simplifies compliance for sellers.
- No Higher TCS for Non-Filers: Similar to TDS, the requirement to collect TCS at higher rates from non-filers of income tax returns (Section 206CCA) has been removed.
- Reduced TCS on Forest Produce: The TCS rate on timber and other forest produce (excluding tendu leaves) under Section 206C(1) was reduced from 2.5% to 2%.
TCS Deposit Decriminalization: Delays in depositing collected TCS are decriminalized if the amount is paid within the stipulated timeframe.
These updates generally aim to simplify compliance and provide relief in specific scenarios related to TCS rules.
TDS Return Filing & Due Dates (FY 2025-26)
Staying compliant with TDS rules involves more than just deducting tax; timely deposit of the deducted TDS and accurate TDS return filing are critical. Failing to meet deadlines can attract interest and significant TDS penalties. Remember, you generally need a valid TAN registration to deposit TDS and file returns.
Key Compliance Deadlines for FY 2025-26 (AY 2026-27):
- TDS Deposit Due Date: Tax deducted must generally be deposited by the 7th of the following month.
Exception: TDS deducted in March can be deposited by April 30th, 2026 (for non-government deductors). - Quarterly TDS Return Filing Due Dates: You need to file quarterly statements detailing the TDS deducted. The common forms are 24Q (for salary) and 26Q (for non-salary payments).
Quarter 1 (Apr-Jun 2025): July 31, 2025
Quarter 2 (Jul-Sep 2025): October 31, 2025
Quarter 3 (Oct-Dec 2025): January 31, 2026
Quarter 4 (Jan-Mar 2026): May 31, 2026 - Issuing TDS Certificates: Form 16 (Salary) and Form 16A (Non-Salary) must be issued to the deductees, typically within 15 days from the due date of filing the quarterly TDS return.
Consequences of Non-Compliance:
- Late Deposit: Interest is charged under Section 201(1A) for delays in depositing TDS (1.5% per month or part thereof).
- Late Filing: A late filing fee under Section 234E (₹200 per day, up to the TDS amount) is applicable. Significant delays can also attract penalties under Section 271H.
Regularly check your Form 26AS TDS statement online to ensure the tax deducted by others on your behalf has been correctly deposited. Maintaining TDS compliance is essential for smooth financial operations.
FAQs on Latest TDS Rules & Changes (FY 2025-26)
What is the new rule for TDS in FY 2025-26?
The most significant new TDS rules effective April 1, 2025, include the introduction of Section 194T (requiring 10% TDS on certain payments over ₹20,000 from firms to partners), increased TDS threshold limits for many sections like 194A (Interest), 194I (Rent), and 194J (Professional Fees), and the removal of higher TDS rates for non-filers (omission of Sec 206AB/206CCA).
What are the basic rules for deducting TDS?
The core TDS rules require the payer (deductor) to deduct tax at the specified TDS rate when making certain payments (like salary, interest, commission, rent) that exceed the defined TDS threshold limit. The deductor generally needs a TAN registration to deposit the deducted TDS with the government and file TDS returns.
What is the TDS limit for FY 2025-26?
The TDS limit (or threshold) varies depending on the nature of the payment and the relevant section of the Income Tax Act. Several limits were increased from April 1, 2025. For example, the TDS threshold for interest under Section 194A for senior citizens is now ₹1 Lakh, and for rent under Section 194I it’s ₹50,000 per month. Refer to the detailed TDS chart for specific limits.
What is the penalty for late payment of TDS?
Late payment or non-payment of deducted TDS attracts TDS penalties. Interest is levied at 1.5% per month (or part thereof) from the date of deduction to the date of deposit for late payment (Sec 201(1A)). For late filing of TDS return filing, a fee of ₹200 per day is charged under Section 234E, capped at the TDS amount, and further penalties can apply for incorrect information or significant delays.
How can I check the TDS amount deducted on my income?
You can easily check the tax deducted against your PAN by viewing your Form 26AS TDS statement. This annual tax statement is available online on the Income Tax e-filing portal and shows details of TDS deducted and deposited by various deductors on your behalf.
What is the rule for TDS payment (deposit)?
Generally, the tax deducted during a month must be deposited with the government by the 7th day of the following month. However, for TDS deducted in March, the deposit TDS filing due dates (for payment) is April 30th for non-government deductors. Timely deposit is crucial for TDS compliance. For complex situations or specific advice, consulting a TDS expert is recommended.
What are the latest changes in TDS for FY 2025-26?
The most significant TDS updates effective April 1, 2025, include the introduction of Section 194T (TDS on payments to partners), substantially increased TDS threshold limits for many common payments like interest (Sec 194A), rent (Sec 194I), and professional fees (Sec 194J), and the removal of higher TDS rates for non-filers of ITR (Sec 206AB/CCA omitted).
What is the new update in TDS thresholds?
A key new update in TDS involves higher exemption thresholds. For example, the TDS limit for interest under Section 194A for senior citizens is now ₹1 Lakh (up from ₹50k), and for rent under Section 194I, the trigger is now ₹50,000 per month (up from ₹2.4 Lakh annually). Many other thresholds for commission, dividends, etc., were also increased, leading to potentially lower TDS deduction on smaller amounts.
What are the rule for TDS on property sale?
The primary rule for TDS on property sale (immovable property other than agricultural land) remains Section 194IA. TDS at 1% is applicable if the sale consideration (or stamp duty value) is ₹50 Lakh or more. While this section wasn’t significantly changed recently, note that the TDS threshold for compensation received on compulsory acquisition of property (Sec 194LA) was increased to ₹5 Lakh effective April 1, 2025.
What is the new TDS limit for FY 2025-26?
There isn’t one single “new TDS limit.” The limit depends entirely on the type of payment (e.g., salary, interest, rent, commission). However, many specific TDS threshold limits were revised upwards effective April 1, 2025. Always refer to the specific section or the updated TDS rate chart for the applicable limit for your transaction.
Conclusion
Staying updated with the latest TDS rates and rules is essential for maintaining compliance and avoiding penalties. The changes introduced in FY 2025-26 reflect the government’s focus on streamlining tax collection and enhancing transparency. Whether you’re a salaried individual, business owner, or professional, understanding these updates will help you plan your finances better and stay tax-compliant.
For expert guidance on TDS filing and compliance, contact ApkiReturn at +91 766 515 6000.
