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Finance Minister Nirmala Sitharaman in her Budget Speech 2025 made announcements regarding the tax deducted at source (TDS) that are going to be implemented from April 1, 2025. Check the latest rules.
The TDS changes are aimed at providing financial relief to taxpayers, mainly investors, senior citizens, and commission earners.
New TDS Rules 2025: The Budget 2025 announcements regarding the tax deducted at source (TDS) are going to be implemented from April 1, 2025. The changes are aimed at providing financial relief to taxpayers, mainly investors, senior citizens, and commission earners.
Increased TDS Exemption for Mutual Funds & Stocks
Investors will benefit from a higher exemption threshold on dividend income and mutual fund (MF) earnings. In the Union Budget 2025-26 presented by Finance Minister Nirmala Sitharaman, the government doubled the TDS exemption limit from Rs 5,000 to Rs 10,000 on dividends from stocks and income from MF units, with effect from April 1.
Higher TDS Threshold on Dividend Income
The Budget has revised the TDS limit on dividend income, increasing the exemption from Rs 5,000 to Rs 10,000, thus allowing investors to retain more of their earnings.
Higher TDS Exemption for Senior Citizens
To provide greater financial relief, the government has doubled the TDS exemption threshold for senior citizens. Starting April 1, 2025, banks will deduct TDS on interest income from fixed deposits (FDs) and recurring deposits (RDs) only if the total interest earnings exceed Rs 1 lakh in a financial year. This means that if a senior citizen’s annual interest income remains within this limit, no TDS will be deducted.
TDS Threshold Raised for General Citizens
For individuals below 60 years of age, the TDS threshold on interest income has been increased from Rs 40,000 to Rs 50,000. This move is particularly beneficial for depositors who depend on FD interest as a key source of income. Now, banks will only deduct TDS if the total interest earned in a financial year exceeds Rs 50,000.
Simplified TDS on Lottery Winnings & Horse Racing Bets
The government has revised TDS rules related to earnings from lotteries, crossword puzzles, and horse racing bets. Earlier, TDS was deducted if total winnings exceeded Rs 10,000 in a financial year, even if received in multiple smaller amounts. Under the new regulation, TDS will only be applied when a single transaction exceeds Rs 10,000.
Example:
Currently, if someone won Rs 5,000 thrice in a year (totaling Rs 15,000), TDS would have been applicable. Now, no tax will be deducted as long as each transaction remains below Rs 10,000.
Relief for Insurance Agents and Brokers
To ease compliance and enhance cash flow for professionals in the insurance and brokerage sectors, the Budget 2025 has increased the TDS exemption limit for commissions. The threshold for insurance commissions has been raised from Rs 15,000 to Rs 20,000, effective April 1, 2025.
What Is TDS?
Tax Deducted at Source (TDS) is a system under the Income Tax Act, 1961, where tax is deducted from an individual’s income at the time of payment, such as salary, interest, rent, or commission. The deducted amount is then deposited with the government by the payer. This ensures that tax is collected in advance rather than at the end of the financial year. TDS helps prevent tax evasion and ensures a steady flow of revenue for the government.
TDS is governed by various sections of the Income Tax Act, such as Section 192 (TDS on salary), Section 194A – (TDS on interest, except securities), Section 194C (TDS on contractor payments), Section 194H (TDS on commission/brokerage), and Section 194I (TDS on rent), and Section 194J (TDS on professional/technical fees).
The tax rates after the Budget 2025 can be read here.
