The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has introduced major revisions to the tax deducted at source (TDS) rules, aimed at providing financial relief to taxpayers, especially senior citizens, investors, and commission earners. Here’s a breakdown of the key changes effective from April 1, 2025.
Higher TDS threshold for senior citizens
The Union Budget 2025 proposed to put more money in the hands of the middle class and senior citizens. The threshold limit has been doubled for senior citizens to achieve this. From April 1, interest income from fixed deposits (FDs), recurring deposits (RDs), etc., will only be subject to deduction if the amount, at the aggregate level in a bank, exceeds Rs 1 lakh in a financial year for the senior citizens. This means if a senior citizen keeps his/her interest income below Rs 1 lakh, then the bank will not cut any TDS.
To avoid new TDS on interest above Rs 1 lakh, how much should senior citizens invest in bank FD?
Higher TDS threshold for general citizens
For non-senior citizens (general citizens), the government has increased the TDS threshold for interest income from Rs 40,000 to Rs 50,000, effective April 2025. This move aims to reduce the tax burden on depositors, particularly those relying on FD interest as a primary source of income. As per the revised rules, the bank will deduct TDS if the aggregate annual interest amount crosses Rs 50,000. However, the bank will not deduct any TDS if a general citizen keeps his/her interest income within the Rs 50,000 limit.
Also read: TDS limit for interest income from bank FD hiked from Rs 40,000 in Budget 2025: Check details
TDS on lottery winnings and horse race bets: New rule for a single transaction
The government has simplified the TDS rules concerning winnings from lotteries, crossword puzzles, and horse races by removing the aggregate limit of Rs 10,000 in a financial year.
Previously, TDS was deducted when total winnings crossed Rs 10,000 in a year, regardless of whether they were received in multiple smaller amounts. TDS will now be deducted only when a single transaction exceeds Rs 10,000.
Example: Earlier, three separate lottery winnings of Rs 8,000 each, amounting to a total of Rs 24,000, would have resulted in TDS being applicable, as the combined amount exceeded Rs 10,000. Under the new rule, no TDS will be deducted as no individual transaction surpasses Rs 10,000.
Higher TDS threshold for insurance and brokerage commissions
The Budget 2025 has also raised the TDS threshold for various commissions, providing relief to insurance agents and brokers. The TDS threshold for insurance commission has been increased from Rs 15,000 to Rs 20,000, effective from 1 April 2025.
These changes aim to ease the compliance burden and ensure better cash flow for small earners in these sectors.
TDS on MFs or stocks
Investors in mutual funds (MFs) or stocks will gain from the increase in the exemption limit from Rs 5,000 to Rs 10,000 on dividends and income earned from MF units or specific companies.
Threshold hiked to Rs 10,000 for TDS on dividend
The Budget has also raised the dividend tax deduction threshold limit from Rs 5,000 to Rs 10,000. Starting April 1, 2025, the new limit will allow equities and MF investors to keep more money in their hands, as tax will be deducted at source when dividend income exceeds Rs 10,000.
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