Omissions in TDS & TCS
Government of India has been trying to streamline Direct tax landscape and there were certain announcement made in Budget 2025 by honourable finance minister and further notified through Finance Bill 2025.
Thresholds for certain sections have been changed and with some omissions, compliance burden for companies is expected to reduce
Let’s have a look at the list of omissions applicable from April 1, 2025
TCS Not Applicable from April 1, 2025
Tax Collected at Source (TCS) applicable on sale of goods under sub section (1H) of section 206C is omitted from April 1, 2025.
Till now, responsibility of collecting/deducting tax was not clearly identified between sellers/buyers. Sellers were required to collect Tax Collected at Source (TCS) at 0.1% on the sale of goods exceeding ₹50 lakh under Section 206C(1H) of the Income Tax Act, if buyer has not deducted TDS under section 194Q of Income Tax Act 1961.
Now, buyers will have to deduct TDS, under section 194Q, on purchase of goods for amount exceeding INR 50 lakh rupees in a financial year.
As per Finance Bill 2025, sub-section (1H) of section 206C has been omitted from April 1, 2025
Omission of Section 206AB and 206CCA
As per the Finance Bill 2025, Section 206AB and 206CCA of Income Tax Act are omitted w.e.f April 1, 2025
Under these sections, deductor / collector were required to determine whether deductee has filed Income Tax Return or not. If the deductee hadn’t filed Income tax return in previous year (s) then tax deduction was to be done at a rate higher than specified rate for that section.
What it means for Businesses?
It is a welcome step for businesses especially MSMEs. Omission of sub section (1H) of section 206C, 206AB & 206CCA will positively impact
- Ease of doing business – It gives clarity to companies that like all other sections of TDS, buyer is responsible to deduct and deposit TDS with government on purchase of goods for amount exceeding INR 50 lakhs in a financial year
- Compliance – Businesses had to spend a significant amount of time in identifying the deductees, who haven’t filed their Income tax returns and due to human errors, it was creating compliance issues. Lesser number of checks and returns to be filed means less compliance burden, which will eventually lead to lesser litigations
- Pricing – Buyers and sellers will have clarity on prices being offered without hassle of accounting for TCS
It’s a step forward by Government of India in the direction of simplifying the tax landscape while everyone is waiting for Income Tax Bill 2025 to be effective from April 1, 2026
Changes in TDS Thresholds
TDS threshold limits have been changed effective from April 1, 2025. Let’s have a look at those sections where TDS thresholds have been changed. Threshold limit for rest of the sections remains unchanged
| TDS Section | Threshold before April 1, 2025 (INR) | Threshold April 1, 2025 onwards (INR) |
| 193 – Interest on Securities | NIL | 10000 (annual) |
| 194 – Dividend for an individual shareholder | 5000 (annual) | 10000 (annual) |
| 194A – Interest other than Interest on Securities | 50,000/- for senior citizens 40,000/- in case of others when the payer is the bank, cooperative society and post office 5,000/- in other cases | (i) 1,00,000/- for senior citizen (ii) 50,000/- in case of others when the payer is a bank, cooperative society and post office (iii) 10,000/- in other cases |
| 194B – Winnings from lottery, crossword puzzle etc. 194BB – Winnings from horse race | Annual threshold of INR 10000 | 10000 on per transaction basis |
| 194D – Insurance Commission | 15000 (annual) | 20000 (annual) |
| 194G – Income by commission on sale of lottery tickets | 15000 (annual) | 20000 (annual) |
| 194H – Commission on Brokerage | 15000 (annual) | 20000 (annual) |
| 194I-B – Rent on Land/Building/Furniture | 240000 (annual) | 50000 (monthly) |
| 194JA/194JB – Fee for Technical or Professional Services | 30000 (annual) | 50000 (annual) |
| 194K – Income in respect of units of a mutual fund | 5000 (annual) | 10000 (annual) |
| 194LA – Income through compensation on acquisition of immovable property | 250000 (annual) | 500000 (annual) |
| 194T – TDS on payment to partners by firms | NIL | 20000 (annual) |