While senior citizens, landlords and those providing professional/technical services are the biggest beneficiaries of the TDS limit hike, the rise in TCS threshold will help foreign travellers and investors, as well as parents sending children abroad for higher education, as they will get more money in their hands, or not wait an entire year to get a tax refund

TDS, TCS limits hiked in Budget 2025: Seniors, landlords, foreign travellers, students to benefit

The Budget proposal to raise limits for tax deducted and collected at source (TDS & TCS) is not only aimed at rationalising tax collection and ease compliance, but also enhance cash flow and spending power for a wide cross-section of people.

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While senior citizens, landlords and those providing professional/technical services are the biggest beneficiaries of the TDS limit hike, the rise in TCS threshold will help foreign travellers and investors, as well as parents sending children abroad for higher education, as they will get more money in their hands, or not wait an entire year to get a tax refund.

“It will create potential short-term revenue impact and is a clear long-term strategy to expand tax base through simplified mechanisms,” says Dinesh Rohira, Founder & CEO, 5nance.com. “These measures reduce the compliance burden on small-scale transactions, while enhancing cash-flow management for individuals and businesses,” agrees Atul Shinghal, Founder & CEO,
Scripbox.

What is the rise in TDS & TCS limits?

Tax Deducted at Source
Interest income: Senior citizens will now be exempted TDS for interest income up to Rs.1 lakh in a financial year, up from Rs.50,000, while for others, it has been raised from Rs.40,000 to Rs.50,000. “The proposal to double the limit for seniors is a forward-thinking move that will enhance the financial security of the elderly,” says Vishwas Panjiar, Partner, Nangia Andersen.

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“Depending on the individual tax slab, senior citizens can now enjoy a relief of up to Rs.15,000. Lesser tax burden will leave more cash in their hands,” says Sudhir Kaushik, CEO, TaxSpanner.

Senior citizens have over 38% share of aggregate individual deposits as of March 2024, points out Sanjay Agarwal, Senior Director, CareEdge Ratings. “This increase will facilitate deposit mobilisation and support banks’ credit to deposit ratio,” he says.

Rent: The Budget has also raised the TDS exemption limit on rental income from Rs.2.4 lakh to Rs.6 lakh, or Rs.50,000 a month, up from Rs.20,000 a month. Anuj Puri, Chairman, ANAROCK Group, says, “This reduces the compliance burden and enhances liquidity for landlords, and will positively impact the rental housing market, especially in the metro cities.”

“Rationalising the TDS provisions of Section 194I is set to benefit the corporates, in particular startups or specified individuals, who will have a higher threshold to withhold tax on rental payments, thus reducing compliance burden,” says Kuldip Kumar, Partner, Mainstay Tax Advisors.

Professional/technical services: With the limit rising from Rs.30,000 to Rs.50,000 for consultants or gig workers providing these services to different companies, more money will flow into their hands as companies will not have to deduct tax up for payments up to Rs.50,000.

Investments: Those who have invested in stocks and mutual funds also benefit as the TDS limit on dividends for shareholders and income from mutual fund units or specified company/ undertaking has been hiked from Rs.5,000 to Rs.10,000.

Tax Collected at Source
The TCS thresholds have also been altered under the Liberalised Remittance Scheme (LRS), benefitting those conducting crossborder transactions. The earlier limit of Rs.7 lakh has been raised to Rs.10 lakh, with education loans from specified institutions made completely exempt. Earlier, 0.5% of the amount was charged for education loans above Rs.7 lakh, while for self-financed education transactions, 5% was charged for amounts exceeding Rs.7 lakh.

“These changes not only make it easier for students and families managing educational expenses abroad, but also offer greater flexibility for investors diversifying into global markets, including the US stocks,” says Nikhil Behl, Co-Founder & CEO, Stocks, INDmoney. “The removal of TCS on education loans further lightens the financial load on students and their families, easing access to educational financing,” says Panjiar.

This story originally appeared on: India Times - Author:Faqs of Insurances