New TDS, TCS limits for FY2025-26 for interest, dividends, prize money, rent announced in Budget 2025: Thresholds hiked

In a bid to rationalise tax collection and ease compliance, the budget has proposed an increase in the limits for tax deducted and tax collected at source (TDS and TCS), which is likely to benefit a wide swathe of the population.

While senior citizens and landlords are the main beneficiaries of the hike in the TDS limit, travellers and parents sending their children abroad for higher education will gain from the rise in the TCS threshold. Senior citizens will be exempted from TDS for interest income up to Rs.1 lakh in a financial year; it is currently Rs.50,000. This is expected to provide a big relief to seniors and improve their cash flow amid lower interest rates on deposits.

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This “forward-thinking move” would enhance the financial security of the elderly, said Vishwas Panjiar, partner, Nangia Andersen LLP. “Depending on the individual tax slab, senior citizens can enjoy a relief of up to Rs.15,000 after this TDS limit enhancement. Lesser tax burden will leave more cash in the hands of senior citizens,” said TaxSpanner CEO Sudhir Kaushik.

Senior citizens have an over 38% share of the aggregate deposits by individuals as of March 2024, pointed out Care-Edge Ratings senior director Sanjay Agarwal. “The TDS limit increase for senior citizens will facilitate deposit mobilisation and support banks’ credit to deposit ratio,” he added.

The budget also raised the threshold for exemption from TDS on rental income from Rs.2.4 lakh a year to Rs.6 lakh, which will benefit people deriving a sizeable income from renting out property, particularly in metros.

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The simplified TDS on rent decreases the compliance burden for tenants (they don’t have to deduct tax on rent up to Rs.50,000 a month) and enhances liquidity for landlords, said Anuj Puri, chairman of real estate consultancy Anarock Group. This “will positively impact the rental housing market, especially in metro cities,” he said.

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The TCS thresholds have also been altered under the Liberalised Remittance Scheme, benefitting those conducting crossborder transactions. Earlier, tax was collected for all remittances above Rs.7 lakh. This limit has now been raised to Rs.10 lakh. For education that is being financed through a loan from specified financial institutions, TCS has been completely removed. 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. “The removal of TCS on education loans further lightens the financial load on students and their families, easing access to educational financing,” said Panjiar of Nangia Andersen.

These changes also offer greater flexibility for investors diversifying into global markets, including the US stocks, said Nikhil Behl, cofounder & CEO, Stocks, INDmoney.