Revised TDS Rules from April 1, 2025: Limits Raised for Tax Deduction on FD Interest and Lottery Wins

Finance Minister Nirmala Sitharaman presented the Union Budget 2025 on February 1, 2025, which has announced major changes to the tax deducted at source (TDS) rules. It focuses on providing financial assistance to taxpayers, especially the senior citizens, commission earners and investors. These changes are effective from April 1, 2025.

What is Tax Deducted at Source (TDS)?

Tax Deducted at Source (TDS) is a part of the Income Tax Act, 1961, where the tax is deducted from the individual’s income at the source of the payment, such as salary, interest, rent, or commission. The deducted tax is then paid to the government by the payer. It prevents tax evasion and ensures that the tax is collected in advance instead of at the end of the financial year.

Key Changes in TDS Rules effective from April 1

TDS Limits for general citizens have been raised

For general citizens, the TDS limit for interest income earned from FDs has been increased to Rs. 50,000 from Rs. 40,000. This means that the bank will not deduct any TDS if your total interest income stays below Rs. 50,000. The TDS will only be levied if the total interest you earn in a year exceeds Rs. 50,000. This will lessen the tax burden on general citizens.

TDS limits raised for Senior citizens

The TDS limit has been increased for senior citizens. From April 1, if you’re a senior citizen, the bank will only deduct tax from your interest income (from fixed deposits, recurring deposits, etc.) if the total interest you earn in a year from that bank exceeds Rs 1 lakh. This means that if your total interest income stays below Rs 1 lakh, the bank will not deduct any Tax Deducted at Source (TDS). This will save more money in the hands of senior citizens.

Revised TDS rules for winnings from lotteries, crossword puzzles

The government has modified the TDS rules regarding winnings from lotteries, crossword puzzles, and horse races by removing the aggregate limit of Rs. 10,000 in a financial year. Earlier, TDS was deducted when the total winnings exceeded Rs. 10,000 annually, irrespective of whether they were received in smaller amounts multiple times. From April 1, 2025, TDS will only be deducted when a single transaction is above Rs. 10,000.

TDS on Mutual Funds or stocks

Those investing in mutual funds or stocks will get benefits from the increased exemption limit to Rs. 10,000 from Rs. 5,000 on incomes and dividends received from mutual fund units or specific companies.

Limits raised to Rs. 10,000 for TDS on dividend

The budget has also increased the dividend tax deduction limit from Rs. 5,000 to Rs. 10,000 from April 1, 2025. Now, mutual fund investors can save more money in their wallets.

TDS Limits increased for insurance and brokerage commissions

The 2025 budget has proposed a raise in the limits of TDS for different commissions to give financial assistance to insurance agents and brokers. From April 1, 2025, the limits for the insurance commission have been increased from Rs. 15,000 to Rs. 20,000. These modifications ensure increased cash flow for small earners in these sectors and reduce the tax burden on them.