TDS & TCS Changes from 1st April 2025: Partner’s Remuneration & Enhance TDS Limits

The Budget 2025 introduced major changes to the existing Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) provisions of the Income Tax Act, 1961. These amendments were introduced with the objective of simplifying tax compliance for businesses and individuals. 

These changes focus mainly on a higher threshold limit, removal of TCS on certain transactions and introduction of new provisions to streamline compliance and smoothen taxation processes. 

This article will cover all the major changes in TDS and TCS that one must know and help understand in an easy way.

Enhanced Threshold Limits For TDS

The applicability of TDS or TCS is only attracted when the transaction is above the threshold limit. With effect from April 1, 2025, the threshold limits for a few sections have been increased from their previous limits. 

The previous and enhanced limits for TDS are given in the following table: 

Enhanced Threshold Limit For TCS

The threshold limit for TCS for remittance under Liberalised Remittance Scheme (LRS) and foreign tour packages has been increased to Rs. 10 Lakhs from the previous limit of Rs. 7 Lakhs. 

Further, TCS will not be applicable on LRS for education if financed through education loan. Section 206C(1G) covering TCS on educational loans has been removed from April 1, 2025. 

The enhanced threshold for TCS is given in the following table:

TDS on Partner’s Remuneration Section-194T

Section 194T was introduced in Budget 2024 to increase the tax base and compliance of partnership firms and LLPs. Section 194T requires firms and LLPs to deduct TDS at the rate of 10% if the payments made to partners are more than Rs. 20,000 in a financial year. This section covers all commissions, remuneration, bonuses, salary, or interest payments to partners.

Removal Of TCS On Sale Of Goods

Previously, the seller had to collect a TCS under section 206C(1H) on the sale of goods if the aggregate value of goods sold exceeded Rs. 50 lakhs with other conditions. This created compliance issues with section 194Q where the buyer had to deduct TDS on the purchase of goods with the same conditions.

Section 206C(1H) has been removed from April 1, 2025, and the seller will not have to collect TCS on goods sold.  

Omission Of Sections 206AB & 206CCA

Sections 206AB & 206CCA required a higher TDS and TCS rates for Non-filers i.e, individuals who do not file tax returns. It was a burden on the dedcutors and collectors to identify such non-filers and furnish returns within the specified due date. 

From April 1, 2025 both the sections will be removed. Hence, there is no need now for businesses to verify if the person has filed tax returns or not in order to determine the TDS or TCS rates. This simplifies compliance and reduces the burden of the businesses. 

Reduced TCS Rates For Forest Produces

The TCS rates for Timber and other forest produce, other than tendu leaves under section 206C(1) has been reduced to 2% from the previous limit of 2.5%. 

Further the definition of forest produce will have the same meaning as per that of the Indian Forest Act 1927 or any State Act. 

Conclusion

TDS and TCS are mandatory provisions that have to be complied with. Failure to comply will attract penalty and interest. It is important for taxpayers to have knowledge of TDS and TCS provisions in order to plan finances and adhere to the relevant provisions. With the revised limits, introductions of new sections and removal of older sections, one should ensure proper compliance with the amended provisions and should not be confused with the earlier ones. 

Related Content:
Income Tax Changes From 1st April 2025