The New Income Tax Bill 2025 introduces significant updates to the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions, aiming to streamline tax compliance, reduce evasion, and simplify the process for taxpayers. Here’s a concise overview of the key changes and their implications:
1. Higher Threshold Limits for TDS
The bill raises the threshold limits for TDS deductions in several categories, reducing the compliance burden on small taxpayers. For instance:
- Interest Income: The threshold for TDS on interest from banks and post office deposits has been increased from ₹40,000 to ₹50,000 for senior citizens and from ₹10,000 to ₹20,000 for others.
- Rent Payments: The limit for TDS on rent has been raised from ₹2.4 lakh to ₹3 lakh annually.
2. Revised TCS Rates for International Transactions
The bill introduces higher TCS rates for foreign remittances and overseas travel packages:
- Foreign Remittances: TCS on remittances under the Liberalised Remittance Scheme (LRS) has been increased from 5% to 10%.
- Overseas Travel Packages: TCS on international tour packages has been raised to 10% (from 5%), applicable even for payments made through credit cards.
3. TCS on Sale of Goods
The new bill clarifies and expands TCS applicability on the sale of goods:
- E-commerce Operators: E-commerce platforms must now collect TCS at 1% on the sale of goods by third-party sellers.
- High-Value Transactions: TCS at 0.1% will apply to the sale of goods exceeding ₹50 lakh in a financial year, with certain exemptions for essential commodities.
4. Simplified Compliance for Small Businesses
To ease the burden on small businesses and individuals:
- Lower TDS Rates: Small businesses with turnover below ₹2 crore can avail reduced TDS rates on certain transactions.
- Exemptions: Small traders and businesses with turnover below ₹10 lakh are exempt from TCS provisions.
5. Digital Push for Compliance
The bill emphasizes digitization:
- Pre-filled TDS/TCS Returns: Taxpayers will have access to pre-filled TDS/TCS returns, reducing errors and saving time.
- Real-Time Tracking: A new portal will allow real-time tracking of TDS/TCS deductions and collections.
6. Stricter Penalties for Non-Compliance
To deter tax evasion:
- Higher Penalties: Non-deduction or late payment of TDS/TCS will attract higher penalties, up to 20% of the tax amount.
- Interest on Delays: Interest rates on delayed TDS/TCS payments have been increased to 1.5% per month.
Conclusion
The New Income Tax Bill 2025 brings a mix of relief and stricter compliance measures for TDS and TCS provisions. While higher thresholds and simplified processes benefit small taxpayers, increased rates and stricter penalties aim to curb tax evasion. Businesses and individuals must stay updated and adapt to these changes to ensure seamless compliance and avoid penalties.