TDS Rule Changes 2025: What Taxpayers Should Know

The new financial year, which kicked in from April 2025, has created a lot of news and buzz amongst the taxpaying population in India. The updates and changes in the new TDS rules are bound to affect everyone and directly impact how much tax you pay while managing your income — whether you’re a salaried employee, an entrepreneur, or someone earning rent.

The concept of TDS (Tax Deducted at Source) is not new. However, of late, the government has tightened the rules around it. This has been done to ensure better compliance and transparency. These tax deduction changes will affect income from various sources — and that’s why it’s important to stay informed and plan ahead.

Let’s break it all down in the simplest way possible so you can keep more of your hard-earned money and stay on the right side of the law.

Also Read: Benefits of Filing Income Tax Return (ITR) 2025

What is TDS and why it Matters

TDS is the amount deducted from your income before it even reaches you. It could be deducted by a company paying you a salary, a tenant paying rent, or a lender paying interest.

Why it’s important:

1. For the Government

• Prevents Tax Evasion – TDS ensures that taxes are deducted at the source, minimizing the risk of individuals or businesses avoiding tax payments.
• Ensures a Steady Revenue Flow – Instead of receiving taxes in bulk at year-end, the government gets a regular inflow throughout the financial year.
• Tracks Taxable Income Efficiently – TDS creates a record of income and tax deductions, helping authorities track taxable income across different sources.
• Reduces Burden on Tax Collection Agencies – With tax deducted upfront, administrative pressure on government agencies reduces significantly.

2. For Taxpayers

• Convenient and Hassle-Free – Taxes are deducted automatically at the time of earning, saving taxpayers from making lump-sum payments.
• Reduces Year-End Tax Liability – Since taxes are deducted in parts, the final payable amount at year-end is minimized.
• Avoids Late Payment Penalties – With TDS, the risk of missing deadlines and incurring penalties reduces.
• Facilitates Easy Refunds – If excess tax is deducted, taxpayers can claim refunds while filing returns.
• Promotes Better Financial Planning – Regular deductions help individuals and businesses manage their finances more effectively.
• Increases Transparency – Every deduction is recorded with the Income Tax Department, building trust and accountability.

If you earn income from different sources, understanding how much tax is deducted — and why — can help you manage your cash flow better.

What are the Changes in TDS in April 2025?

From April 1, 2025, several new provisions will be added under the new TDS rules 2025. These are not just minor updates — they are meant to bring many income sources under stricter tax scrutiny.

The new TDS (Tax Deducted at Source) rules effective from April 2025 are aimed at widening the tax base, improving compliance, and capturing under-reported income sources. Here are the key changes every taxpayer should know:

1. Increased TDS Thresholds

To reduce the burden on small taxpayers and avoid unnecessary deductions, the government has increased threshold limits under several sections:

• Interest Income (Section 194A): Higher exemption limit before TDS is deducted on bank/post office deposits.
• Dividend Income (Section 194): Revised threshold for dividend payments, ensuring small investors are not taxed upfront.
• Rent Payments (Section 194-I): Threshold limit for TDS on rent paid to landlords has been increased.
• Commission/Brokerage (Section 194H) & Insurance Commission (Section 194D): Deduction limits raised to ease compliance for agents and intermediaries.
• Professional Fees (Section 194J): Higher threshold for payments to professionals before TDS applies.
• Winnings from Lottery, Games, or Horse Races (Sections 194B & 194BB): Threshold increased, offering relief for small winnings.
• Compensation on Acquisition of Immovable Property (Section 194LA): Enhanced exemption limit before TDS deduction on compensation payouts.

These changes ensure that only substantial income sources are taxed at source, while smaller earnings are spared.

2. Introduction of Section 194T

A new TDS section (194T) has been introduced to cover emerging income categories (details expected in Finance Bill 2025). This addition aims to plug tax leakages in new sectors and income streams.

3. Removal of Higher TDS/TCS for Non-Filers

Earlier, non-filers of Income Tax Returns were subject to higher TDS/TCS rates as a penalty for non-compliance. From April 2025, this provision is being removed, simplifying the TDS structure and reducing compliance disputes.

4. Rationalisation of TDS on Income from Securitisation Trust (Section 194LBC)

The TDS mechanism for income earned through securitisation trusts has been rationalised, aligning it with industry practices and improving clarity for investors and financial institutions.

Also Read: What Are the Tax Benefits of a Business Loan?

How will these New TDS Rules Affect you?

The new TDS rules 2025 are not just targeted at businesses or high earners. Even regular people who earn from multiple sources will see changes.

Here’s how it might affect you:

1. Interest Income (Other than Interest on Securities)

TDS will be deducted on bank deposits, corporate bonds, and other interest income once it crosses the new threshold. Different exemption limits apply for senior citizens, individuals, and other cases.

2. Dividend and Mutual Fund Income

If you earn dividends or income from mutual funds, TDS will now apply once your annual income exceeds the revised threshold.

3. Rental Income

When rent paid to a landlord exceeds ₹50,000 per month, the tenant must deduct TDS before payment.

4. Commission/Brokerage Income and Insurance Commission

Agents, brokers, and intermediaries will face TDS deductions once commission earnings cross the higher threshold set under Section 194H and 194D.

5. Professional or Technical Fees

Freelancers, consultants, and professionals will see TDS deducted by clients once payments exceed the prescribed limit under Section 194J.

6. Winnings from Lotteries, Crossword Puzzles, Horse Races, etc.

All winnings from lotteries, online games, and horse races will attract TDS at the source, regardless of whether the amount is received in cash or online.

7. Payments Made to Partners

Any remuneration, interest, or profit share paid to partners in a partnership firm will now attract TDS under updated rules.

8. Higher TDS for Non-Filers (Section 206AB Removed)

The earlier provision of higher TDS for non-filers has been removed, simplifying tax compliance and ensuring uniform rates for all taxpayers.

So, it’s not just about understanding tax deduction changes. It’s also about being ready to adapt to how your income gets taxed. With income sources growing fast, the government wants more transparency in income tax deductions from all channels.

What do the New TDS Rules Mean for Home Loan Borrowers?

With the updated TDS rules effective from April 2025, home loan borrowers must pay closer attention to compliance with them when they step out to purchase property. Under Section 194-IA of the Income Tax Act of India, 1961, buyers are required to deduct 1% TDS on property transactions exceeding INR 50 lakh, regardless of whether part of the payment is financed through a home loan.

When you purchase a property using a home loan, the lender pays the seller directly. However, as the buyer, you are still legally responsible for deducting and depositing TDS with the government. While some lenders may guide you, the compliance duty rests on the borrower. Failing to do so may attract penalties and delay property deal processing.

1. Deduction of TDS

The buyer must deduct 1% TDS (if property value exceeds ₹50 lakh) before making payment to the seller, even if the funds come via a home loan. Lenders do not take this responsibility.

2. Deposit of TDS

After deduction, the buyer must deposit the TDS amount with the government through Form 26QB. Missing this step can lead to interest and late fees, affecting loan credibility.

3. Issuing Form 16B

Once TDS is deposited, the buyer has to issue Form 16B (TDS Certificate) to the seller. This document confirms compliance and is often required by both seller and lender for record-keeping.

4. Consequences of Non-Compliance

If the buyer fails to deduct or deposit TDS, they may face penalties, interest, and notices from the IT Department. It can also delay property registration and impact loan disbursement timelines.

Also Read: Different Types of Income Tax Returns (ITR) Forms

What Should You Do to Stay Compliant?

Don’t wait until the last moment. A few small steps today can save you big trouble later.

Here's what you can do:

• Check your PAN-Aadhaar link: This avoids higher TDS (20%) in case of non-linking.
• File ITR on time: Always. Penalties are steep and increase yearly.
• Track multiple incomes: Especially if you’re freelancing, investing, or earning from rent.
• Consult a professional: Get advice if you're unsure about deductions or categories.

Keep these things in mind. After all, being aware of the new TDS rules can help you save money and stay stress-free.

Also Read: Income Tax Return - New Tax Regime vs. Old Tax Regime

The Bottom Line

The new TDS rules 2025 are not just small updates. They’re part of a wider effort by the government to ensure that tax is collected at every possible point of income. If you're earning from crypto, rent, freelancing, or even online games — you need to know how these tax deduction changes affect you.

Being prepared is key. Review your income sources, check your tax forms, and get professional help if needed. Compliance is now easier than ever — if you stay updated.

Apply for a loan now to get expert financial support and simplify your tax journey.

Moreover, to accurately calculate your EMIs using an Home Loan EMI Calculator. This way, you save time and effort on calculations while also being able to plan your finances well!

FAQs

Q.1. What are the new TDS rules for 2025?

A. Under the new rules, effective from April 1, 2025, TDS will only be applicable on individual winnings exceeding INR 10,000. For example, if a person wins INR 8,000 three times, totalling INR 24,000, no TDS will be deducted as each win is below the INR 10,000 threshold.

Q.2. Is TDS mandatory for salary?

A. Yes, the deduction of TDS on an individual’s salary is mandatory under Section 192 of the Income Tax Act of India, 1961. Every employer needs to deduct TDS on their employee’s salary if the income amount is over the basic exemption limit.

Q.3. Who are exempted from TDS in India?

A. Some people are exempted from TDS. These exemptions apply to government bodies, senior citizens, low-income individuals, notified institutions, and payments below the prescribed TDS threshold limits.

Q.4. What if TDS is not deducted?

A. If TDS is required but not deducted for domestic payments, 30% of the expense amount will be disallowed when computing the taxable income.

Q.5. Is TDS refundable?

A. Basically, Tax Deducted at Source (TDS) is the sum that is deducted from a taxpayer's income, like salary, interest from bank accounts, rent, etc. TDS can be refunded if the TDS collected is more than what you owe to the government.

Disclaimer:

The contents of this article are for information purposes only and are not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise, based on the contents and information mentioned. For more information , please visit www.godrejcapital.com