In the Union Budget 2025-26, India’s Finance Minister, Nirmala Sitharaman, announced significant reforms to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions. The TDS threshold for rent payments has been increased from ₹2.4 lakh to ₹6 lakh annually, reducing the compliance burden for tenants and landlords. Additionally, the TCS threshold under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) has been raised from ₹7 lakh to ₹10 lakh, facilitating higher foreign remittances without additional tax collection. These measures aim to simplify tax processes and provide relief to taxpayers.
On February 1, 2025, India’s Finance Minister, Nirmala Sitharaman, unveiled the Union Budget for the fiscal year 2025-26, introducing significant reforms in tax deduction and collection mechanisms to simplify compliance and provide relief to taxpayers across the country.
Key Highlights:
- Tax Deduction at Source (TDS) on Rent Payments: The annual threshold for TDS on rent has been increased from ₹2.40 lakh to ₹6 lakh. Previously, tenants were required to deduct TDS at 5% on monthly rent payments exceeding ₹50,000. With the new threshold, TDS will now be applicable on monthly rents exceeding ₹50,000, but at a reduced rate of 2%, effective October 1, 2024.
- Tax Collection at Source (TCS) on Foreign Remittances: The threshold for TCS under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) has been proposed to increase from ₹7 lakh to ₹10 lakh. This adjustment aims to facilitate smoother remittances for individuals sending money abroad.
- Higher Education Remittances: For remittances made towards education, especially when funded through loans from financial institutions, the government has proposed a waiver of TCS. This move is expected to ease the financial burden on students pursuing studies abroad.
- Senior Citizens’ Interest Income: The limit for tax deduction on interest income for senior citizens has been raised from ₹50,000 to ₹1 lakh, providing additional financial relief to the elderly population.
- Decriminalisation of TDS and TCS Offences: Building on reforms initiated in July 2024, delays in the payment of TDS up to the due date of filing statements were decriminalised. This relaxation has now been extended to TCS provisions, aiming to reduce the compliance burden and promote a more taxpayer-friendly environment.
These measures reflect the government’s commitment to rationalising tax structures, reducing compliance burdens, and supporting various segments of the population, including tenants, senior citizens, and students aspiring for international education.
