Rationalizing TDS and TCS was a long ask from the Industry and the Finance Minister has now addressed
Budget 2025 has brought a lot of cheer to many fronts. While the no income tax till Rs 12 lakh announcement is certainly the one announcement making the headlines, the government has also announced tax deducted at source (TDS) and tax collected at source (TCS) reforms for simplified compliance. Let us take a closer look.
Says Anil Talreja, partner, Deloitte India: “Rationalizing TDS and TCS was a long ask from the Industry and the Finance Minister has now addressed it.”
TDS On Rent Limit Increased From Rs 2.4 lakh To Rs 6 lakh
Earlier, if a tenant was paying a rent exceeding Rs 2.4 lakh annually, he or she was required to deduct TCS. The TDS amount had to be deducted before paying the rent to the landlord. Now, that limit has been increased to Rs 6 lakh.
The tenant could deposit the amount with the government and issue a TDS certificate to the landlord which the landlord could claim as credit when filing their tax return.
“The Budget has increased the annual limit of Rs 2.4 lakh for TDS on rent to Rs 6 lakh in case of renting for non-residential purposes. This will reduce the tax burden on smaller taxpayers who are into the business of renting out smaller premises for their living and thus enjoy higher disposable income,” says Vimal Nadar, senior director & head of research, Colliers India.
TCS Threshold For Foreign Remittances Hiked To Rs 10 Lakh From Rs 7 Lakh
This Budget has also raised the foreign threshold of foreign remittance under the liberalized remittance scheme (LRS) from Rs 7 lakh to Rs 10 lakh. This move will bring relief to those who make smaller foreign exchange remittances mainly expenses for education, travel, medical expenses, and investments. More importantly, TCS on foreign education loans has been removed when it is from specific financial institutions.
Adhil Shetty, CEO, BankBazaar.com, said that more than one single change, it is the combination of reliefs that students exploring foreign education can now benefit. "Raising the TCS threshold under the RBI’s LRS from Rs 7 lakh to Rs 10 lakh reduces the compliance burden for those funding higher education abroad. In addition, TCS on education-related remittances, when sourced from educational loans, have also been taken away. This is a welcome step for students and their families, as it ensures students aren’t financially penalized for pursuing global opportunities. Together, these changes support easier implementation, lower costs, and provide much-needed financial relief for families investing in education."
“Though there was a need to rationalize these TDS provisions and it was expected that a singular (or max three rates) should be in place, yet the provisions currently rationalized does provide some easing out on the compliance and administrative burden,” says Rohit Garg, partner, Shardul Amarchand Mangaldas and Co.
A new income tax bill will be introduced next week that will retain half of the existing provisions. This is expected to bring further relief to the middle class.
Also, follow Outlook Money's live blog here.