New rules for TDS are going to be enforced in the country from the beginning of the financial year 2025-26. These changes were proposed in the budget of the central government itself, which will be implemented from April 1, 2025. The changes have been made to provide some relief to the taxpayers. Under the new rules, significant changes have been made in the TDS deduction. Let us know about these changes and who is going to be affected by the new rules.
TDS Limit increased for Senior citizens
The government has hiked the limit of TDS deduction on Fixed deposits (FD) and Recurring deposits (RD). The limit has been doubled, i.e., from Rs. 50,000 to Rs. 1 lakh in a year. From April 1, the bank will only deduct tax from the interest income of senior citizens if the total interest is more than Rs. 1 lakh in a year. This means that if the interest income earned during a financial year is less than Rs. 1 lakh, then the banks will not deduct TDS from it. This will provide financial relief to senior citizens and allow them to save more money.
TDS Limit increased for General Citizens
For general citizens, the TDS limit for interest income earned from FDs has been increased by Rs. 10,000, from Rs. 40,000 to Rs. 50,000. From April 1, 2025, the banks will not deduct any TDS if your total interest income is less than Rs. 50,000. The TDS will only be deducted if the total interest you earn in a year crosses Rs. 50,000. This will reduce the tax burden on the general citizens.
Revised TDS Rule on Earnings from Lottery, Horse Racing and Crossword Puzzles
The government has revised 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 were more than Rs. 10,000 annually, regardless of whether they were received in smaller amounts multiple times. From April 1, 2025, TDS will only be deducted when a single transaction exceeds Rs. 10,000.
For example, suppose you have won a lottery of Rs 8,000 three times; therefore, your total earnings from winning the lottery are Rs 24,000. Earlier, the tax was deducted from it but with the new rule, No TDS will be imposed as the winning amount in a single transaction is not more than Rs. 10,000.
Limits Raised for TDS Deduction on Dividend Income
The new rules will also benefit investors investing in mutual fund schemes and the stock market. Earlier, the TDS was levied on the dividend income of more than Rs. 5,000 through shares and mutual fund units. But, with the new rules, now the limit is raised to Rs. 10,000 from April 1, 2025. This means that no TDS will be deducted from the dividend income of up to Rs. 10,000 from mutual funds. Now, mutual fund investors can save more money in their pockets.
TDS Limit hiked on Insurance and Brokerage Commission
Insurance agents and brokers will also benefit from the new rules. The TDS limit has been increased from Rs. 15,000 to Rs. 20,000. These changes will enhance cash flow for small-scale agents in these sectors and reduce the tax burden on them.
The revised TDS rules that are implemented from April 1 are designed to offer relief to senior citizens, investors and individuals earning through commissions. These rules will allow the middle class and small earners to save more money in their pockets.