New TDS Rules From April 1: Important Changes and Their Impact

Finance Minister Nirmala Sitharaman announced major changes to the TDS (Tax Deducted at Source) rules in the Union Budget 2025. These updates are designed to give financial relief to taxpayers, especially senior citizens, investors, and those earning commissions. Below are some highlights of the key changes that will be in effect from April 1, 2025.

Higher TDS Limit for Senior Citizens

The Union Budget 2025 focuses on providing more financial help to the middle class and senior citizens. To achieve this, the TDS limit for senior citizens has been doubled. Starting April 1, banks will deduct TDS on interest from fixed deposits (FDs) and recurring deposits (RDs) only if the total interest earned in a year exceeds Rs. 1 lakh. This means that if a senior citizen’s interest income stays below Rs. 1 lakh in a financial year, no TDS will be deducted by the bank.

Higher TDS Limit for General Citizens

The government has increased the TDS limit for interest income from Rs. 40,000 to Rs. 50,000 for non-senior citizens, which will be effective from April 2025. This change is intended to reduce the tax burden on depositors, particularly those who rely on FD interest as their sole source of income. Banks will only deduct TDS if the total interest received in a year is more than Rs. 50,000, according to the new rules. However, if a regular citizen’s interest income stays within this Rs. 50,000 limit, no TDS will be deducted.

Increased TDS limit for insurance and brokerage commissions

The Budget 2025 has increased the TDS limit for various commissions, giving relief to insurance agents and brokers. From April 1, 2025, the TDS limit for insurance commissions will increase from Rs. 15,000 to Rs. 20,000. These changes will help reduce compliance hassles and improve cash flow for small earners in these fields.

TDS on Mutual Fund or Stocks

Mutual fund and stock investors will benefit as the tax exemption limit on dividends and income from MF units or certain companies has increased from Rs. 5,000 to Rs. 10,000.

Tax Deduction on Lottery Prizes and Horse Race Wagers: New Rule for Single Transactions

The government has made TDS rules simpler for winnings from lotteries, crossword puzzles, and horse races. Earlier, tax was deducted if the total winnings in a year crossed Rs. 10,000, even if received in small amounts. Now, TDS will be deducted only if a single winning amount is more than Rs. 10,000.

Limit Increased to Rs 10,000 for TDS on Dividend

The Budget 2025 also increased the dividend tax deduction limit from Rs. 5,000 to Rs. 10,000. From April 1, 2025, investors in stocks and mutual funds will get to keep more of their earnings. Tax will now be deducted only if their dividend income goes over Rs. 10,000.

Section 194T: TDS on Partner Payments by Firms

Currently, partnership firms and LLPs do not deduct TDS on payments made to their partners. TDS is only applicable when payments are made to employees of the firm. So, if you receive remuneration, interest, bonus, or commission as a partner, there is no TDS deduction on these payments.

Budget 2024 brought about a new provision that payments by a partnership firm to partners would now be subject to TDS (Tax Deducted at Source) under Section 194T.

The Same is applicable from 1st April 2025.