The Budget 2025 proposed to hike the threshold limit of Tax Deducted at Source (TDS) to Rs 10,000 in a financial year (FY). 

In other words, TDS will be deducted only if the interest income crosses the limit of Rs 10,000 in a financial year.  The securities include government securities, bonds, and debentures issued by a company. 

Investors investing in different govt securities and govt bonds will have zero tax deducted as interest, provided it is below the Rs 10,000 limit. These amendments are set to take effect from April 1, 2025.

Key Changes in TDS Thresholds:

1. Interest on Securities (Section 193):
   • Previous Threshold: No minimum limit; TDS was deducted on all interest earnings.
   • Revised Threshold: Rs.10,000 per financial year.
   • Implication: Investors earning interest from government securities, bonds, and debentures will now face TDS only if their annual interest income exceeds Rs.10,000. 
2. Dividend Income (Sections 194 and 194K):
   • Previous Threshold: Rs.5,000 per financial year.
   • Revised Threshold: Rs.10,000 per financial year.
   • Implication: Shareholders receiving dividend income up to Rs.10,000 annually will be exempt from TDS, benefiting small investors. 
3. Interest from Bank Fixed Deposits (Section 194A):
   • For General Citizens:
     • Previous Threshold: Rs.40,000 per financial year.
     • Revised Threshold: Rs.50,000 per financial year.
   • For Senior Citizens:
     • Previous Threshold: Rs.50,000 per financial year.
     • Revised Threshold: Rs.1,00,000 per financial year.
   • Implication: This increase provides additional financial relief to both general and senior citizens who rely on fixed deposit interest as a source of income. 
4. Insurance and Lottery Commissions, Brokerage (Sections 194D, 194G, 194H):
   • Previous Threshold: Rs.15,000 per financial year.
   • Revised Threshold: Rs.20,000 per financial year.
   • Implication: Individuals earning commissions from insurance, lottery ticket sales, or brokerage services will now have a higher exemption limit before TDS is applied. 
5. Rent on Land or Building (Section 194I):
   • Previous Threshold: Rs.2,40,000 per annum.
   • Revised Threshold: Rs.50,000 per month (Rs.6,00,000 per annum).
   • Implication: Landlords, especially senior citizens who depend on rental income, will benefit from reduced TDS on their earnings. 

These adjustments are expected to enhance disposable incomes, particularly for senior citizens and small taxpayers, thereby stimulating economic activity and simplifying the tax compliance process.

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