The Indian government has announced significant changes in tax regulations, particularly in TDS (Tax Deducted at Source) and TCS (Tax Collected at Source), as part of Budget 2025. These revisions, effective from April 1, are designed to ease financial burdens on taxpayers and businesses. The focus is on reducing tax deductions, simplifying compliance, and boosting cash flow for individuals and enterprises. Let’s take a closer look at the key changes and how they may impact you.

Higher TDS Threshold: More Money in Your Pocket

The government has increased the TDS deduction limit, meaning fewer individuals and businesses will be subject to tax deductions on their income. TDS applies to interest income, rent payments, and large transactions. With the new increased threshold, more money will stay in the hands of taxpayers, allowing better financial management. This move is expected to particularly benefit middle-class taxpayers and small businesses.

Sending Money Abroad Becomes Easier

If you send money abroad for education, family support, or other personal reasons, the TCS (Tax Collected at Source) limit has now been raised from Rs 7 lakh to Rs 10 lakh. This means that no additional tax will be deducted unless the transferred amount exceeds Rs 10 lakh. Furthermore, money sent abroad through an education loan will now be exempt from TCS, reducing the financial burden on students and their families.

Boost for Businesses: No TCS on Sales Above Rs 50 Lakh

Currently, businesses with annual sales above Rs 50 lakh are subject to 0.1% TCS. From April 1, this tax will no longer be applicable, offering substantial relief to businesses engaged in large transactions, particularly exporters and high-volume traders. This exemption aims to enhance liquidity and encourage larger business transactions without additional tax burdens.

Relief for Those Who Don’t File ITR

Under current regulations, individuals and small business owners who do not file Income Tax Returns (ITR) are charged a higher rate of TDS or TCS. However, the government has now scrapped this rule. This decision is expected to benefit small business owners, daily wage earners, and self-employed individuals, reducing unnecessary tax deductions.

No More Harsh Penalties for Late TCS Deposits

Until now, failing to deposit TCS on time could result in legal action, including imprisonment for up to seven years. However, from April 1, this will change. If the pending amount is deposited within the stipulated time, no legal action will be taken. This amendment reduces the fear of strict penalties and gives taxpayers a fair chance to comply without severe consequences.