New TDS rules: Finance Minister Nirmala Sitharaman’s Union Budget 2025 presentation included significant modifications to TDS (Tax Deducted At Source) regulations, offering financial benefits to various taxpayer categories, including senior citizens, investors and commission earners. These changes in TDS rules will take effect from April 1, 2025.
New TDS Limits for Senior Citizens
The Union Budget 2025 aimed to increase disposable income for middle-class and senior citizens. Starting April 1, 2025 interest earnings from FDs, RDs and similar instruments will face deductions only when the cumulative amount in a bank surpasses Rs 1 lakh during a financial year, according to an ET report. Senior citizens maintaining interest earnings below Rs 1 lakh will be exempt from bank TDS deductions.
Revised TDS Thresholds for Regular Citizens
For regular citizens, the government has raised the TDS threshold on interest income to Rs 50,000 from Rs 40,000, beginning April 2025. This adjustment seeks to decrease depositors’ tax obligations, particularly affecting individuals dependent on FD interest for primary income.
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Under the new regulations, banks will implement TDS when yearly interest totals exceed Rs 50,000. Regular citizens keeping interest earnings within Rs 50,000 will avoid TDS deductions.
TDS Rules Simplified for Gaming Winnings
The government has streamlined TDS regulations for lottery winnings, crossword puzzles, and horse racing by eliminating the yearly aggregate threshold of Rs 10,000. The new regulation specifies that TDS applies only when a single winning exceeds Rs 10,000, replacing the previous system where tax was deducted when cumulative winnings surpassed Rs 10,000 annually.
For instance: If someone wins Rs 8,000 three times, totalling Rs 24,000, no TDS will apply under the new rule, as each individual win is below Rs 10,000. Previously, TDS would have been applicable on the total amount, says the ET report.
Insurance and Brokerage Commission Updates
The Budget 2025 introduced higher TDS thresholds for commission earnings. Insurance agents will benefit from an increased TDS threshold of Rs 20,000, up from Rs 15,000, effective April 1, 2025. These adjustments are intended to reduce compliance requirements and improve cash flow for smaller earners.
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Investment Income Changes
For investors in mutual funds and stocks, the dividend and income exemption limit has been increased to Rs 10,000 from Rs 5,000.
Dividend Tax Modifications
From April 1, 2025, investors will enjoy a higher dividend tax deduction threshold of Rs 10,000, increased from Rs 5,000. This change benefits equity and mutual fund investors, as TDS will only apply when dividend earnings exceed Rs 10,000.